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Rob RomascoRob Romasco, president of the board of AARP, said proposed cuts to Social Security are “bad policy.” (Staff photo)
People who receive Social Security benefits could lose $2,000 over the next 10 years if a federal proposal goes into effect, according to AARP’s board president.
In the wake of cuts proposed to Social Security, the AARP has been making a national tour to get public comments on the issue, said Rob Romasco, AARP’s national board president. The tour came to the Kansas City area last week.
Millions of people have already signed a petition or sent a message to Congress to stop the cuts, he said. Cuts would affect some of the people who are the neediest.
The cuts to Social Security are contained in President Obama’s budget under a proposal called “chained CPI” (consumer price index). It would reduce the cost-of-living adjustment by $127 billion over a 10-year period. According to Romasco, the cut also would affect other groups who receive federal benefits, including 600,000 veterans in Kansas and Missouri, who could be hit by a double whammy.
“It’s going to start to add up over time,” Romasco said. “We think it’s bad policy.”
Cuts could start as soon as the law goes into effect, if passed, and would be applied to today’s seniors, according to the AARP. The cuts could get worse every year, AARP says. Romasco pointed out that Social Security is self-funded, and retirees who receive Social Security have paid into the program all their working lives. Immediate implementation of “chained CPI” for those who are already in the program would mean they don’t have an opportunity to build up their other retirement savings to adjust for it.
While an average $200 cut per year doesn’t sound like much to a wealthy person, to the typical senior citizen trying to live on the average benefit of around $15,000 a year, it can be a lot, according to Romasco. Some are already buying prescription drugs that are generic and already cutting back on food expenses, so a further cut could come from money they need to live.
At the national level, AARP is lobbying to separate Social Security from the budget discussion, he said. There are many other ways to address the overall issue, he believes.
Romasco said much broader issues than Social Security and chained CPI need to be addressed by the nation. With a larger number of baby boomer retirees, one of the questions is “what kind of a country will we live in?” he asked. Other questions for a national discussion might be how will the nation design its transportation, and what sort of an economy will the nation have, he said.
The AARP website at www.aarp.org/, under “You’ve Earned a Say,” includes a discussion of different ways to strengthen Medicare and save billions, without hurting senior citizens, according to Romasco. People are asked to look at information, weigh the pros and cons, and select the solution they favor.
When the Social Security program came into being in the 1930s, it was considered just one part of a “three-legged stool” for retirement, he said. The other two legs were private pensions and savings and investments.
“Two of the three legs are getting a little wobbly,” Romasco remarked. For one in four people, Social Security is all the income they receive in retirement. For two out of three people, the majority of their retirement income is Social Security, he added.
What should people in Wyandotte County be doing now for their retirement years?
They should be saving more for retirement, Romasco said. Of those who are over 45, more than half nationally have nothing saved for retirement, he said.
Romasco added he realizes a lot of people are just trying to get to the end of the week.
For those who haven’t been able to save for retirement and are approaching it, they should examine the difference in their income according to the age they retire, he said. Filing for Social Security at age 62 may mean a smaller benefit, and if they wait until a later age, they could receive a larger income. It helps to work out a budget for retirement in advance.
Potential retirees also need to think about what they’ll do with their time, he said, and what effect retirement will have on them. Also, they need to think about their medical costs and how they will take care of them. Typically Medicare only covers 60 to 70 percent of medical costs, he said, and some retirees have another policy that helps pay costs.
For those who are still working and have an opportunity to contribute to a 401(k) plan, they should be making sure they match it and max it out, if possible, he said.