TRS or Social security, inflation is hurting us.

I posted the other day how the actual cost of living is running ahead of our Teacher Retirement System public pension, which is fixed at 3% compounded. We won’t see a change in our monthly retirement benefit until next February.

Remember that career teachers in Illinois receive no Social Security benefit. Those of us who have paid into Social Security at other jobs have our benefit reduced by roughly two thirds. We receive no spousal death benefit from the Social Security system.

This is the result of WEP/GPO, federal laws that discriminate against teachers and other public employees in 15 states.

I pointed out that for the past twenty years our 3% yearly benefit increase more or less matched the actual increase in the Consumer Price Index which calculates the cost of goods and services.

This year the CPI is surging above 5%.

Workers in the private and public sector who are members of a union have the ability to bargain increases that keep up with inflation.

Retirees on a public pension or on Social Security have no such power. Our yearly pension increased is fixed by the state legislature or the federal government and is not up for discussion.

Retirees on Social Security like those of us on a public pension are also losing ground to inflation.

The Social Security payment typically is adjusted annually. 

Benefits go up if there is a measurable increase (at least 0.1 percent) in the price index from year to year.

For 2021, the cost-of-living increase is 1.3% boosting benefits by an average of $20 a month starting in January. The COLA was 1.6 percent in 2020, 2.8 percent in 2019 and 2 percent in 2018.

The CPI-W is a calculation used for urban wage earners and clerical workers.

For August, the CPI-W jumped 5.8% year-over-year. In July, it had jumped by 6.0%, in June by 6.1%. The summer readings are the highest since July 2008, and before then, since 1990.

The COLA to be applied to Social Security benefits starting in January 2022 is based on the average year-over-year percentage increase of CPI-W in July (6.0%), August (5.8%), and September (to be released a month from now).

If the September reading comes in at 5.6%, the COLA for 2022 would be 5.8% (the average of July’s 6.0%, August’s 5.8%, and September’s 5.6%). This 5.8% would match the COLA of 2009. Both would be the highest since 1982 (7.4%).

While the increase will provide some relief from the price increases that have been eating away at the incomes of those of us whose benefit increases are fixed, it will still be insufficient to compensate for the surging costs that individuals may face.

If the beneficiary is renting in the Chicago area where rents have been soaring in the double digits, a 5.8% COLA won’t go far. 

If a beneficiary drives a lot, the 43% jump in gasoline prices is going to hurt. Used vehicle prices are up 32% from a year ago, new vehicle prices 7.6%.

Take housing. The index for rent rose only 2.1% and the index for the costs of homeownership rose only 2.6%. The Chicago area home prices and rents are way beyond that.

The COLA for 2021 was only 1.3%, which was based on the average of CPI-W in July, August, and September 2020, when CPI readings happened to be very low. So, given the price surges in 2021, that lousy 1.3% COLA this year is leaving many people deeply in debt.

Whether we rely on our public pension or on Social Security, inflation is a looming threat.

2 thoughts on “TRS or Social security, inflation is hurting us.

  1. Whine whine whine.
    Freddie boy, it is important to look at what drives inflation. Retired folk are not impacted by inflation in education, for instance so subtract that. Also, one might ask what was magic about 3%? Based on recent increases in social security you have been running ahead of the game for the past few years. Suck it up and join the real world. Your beloved union did negotiate the 3%, did they not? As you often remind us, a deal is a deal.

    1. The 3% TRS annual increase was not union negotiated. It was enacted by the Illinois legislature thirty years ago when inflation was at 13%.

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