Recession May Cut Baby Boomer Social Security by $40,000
Author: The Senior Citizens League
Published: 2010/12/16 - Updated: 2025/04/21
Publication Type: Findings
Topic: U.S. Social Security - Publications List
Page Content: Synopsis - Introduction - Main - Insights, Updates
Synopsis: This report, based on research by The Senior Citizens League, highlights how the recession's unique economic pressures - particularly slowed wage growth and the absence of annual cost-of-living adjustments (COLAs) - are expected to cost early Baby Boomer retirees up to $40,000 in lifetime Social Security benefits. As the most comprehensive study to date examining this impact, it reveals an unprecedented inequity where those born in 1949 will receive smaller benefits compared to similar workers born just a year earlier. The information is authoritative and valuable because it is backed by a major seniors' advocacy group with a large membership base and aims to inform public debate and policymaking. Seniors, people with disabilities, and advocates may find this particularly useful, as it underscores the long-term risks of reduced benefits and highlights growing financial vulnerabilities among retirees - Disabled World (DW).
Introduction
Study: Recession Will Cost Baby Boomers Up To $40,000 in Social Security Benefits - Unprecedented Economic Factors Will Lead to Rare Drop in Initial Social Security Benefits and Reduce Lifetime Earnings.
Focus
Baby Boomers will see greatly reduced Social Security benefits over the course of their retirements due to an unprecedented combination of low wage growth and no annual cost-of-living adjustments (COLA), according to a new study by The Senior Citizens League. And those who first become eligible for Social Security in 2011 will receive lower benefits than retirees born a year earlier.
This is the most comprehensive study ever released to show the recession's impact on Social Security benefits for the first wave of baby boomers.
It found that the combination of rapidly slowing wage growth and no COLA is shrinking the normal increases in initial retirement benefits. An inequity will also be created: people born in 1949 (who turn 62 next year) will receive lower benefits than retirees with similar work histories born just one year earlier. Moreover, the lack of a COLA will reduce lifetime Social Security benefits by as much as $40,000 for many retirees with average earning histories (reductions will be felt regardless of the age at which people begin claiming benefits, and some higher-earning seniors stand to lose even more).
Recent wage and consumer price trends - two of the key factors in determining Social Security benefits - have combined to form a "perfect storm" for the first wave of Baby Boomers. Since the start of the recession, average wage growth has plummeted, and there will be no COLA in 2011 for the second year in a row.
Under normal economic conditions, the initial benefits of each succeeding birth year tend to be slightly higher than the previous birth year as wages rise over time. But average wage growth has been slowing since the 1980s and has dropped markedly since 2008.
Furthermore, low inflation (a situation that government economists expect to continue) led to no COLA in 2010 and 2011. The loss of the compounding effect of a COLA on lifetime benefits is high, and grows the longer a senior spends in retirement. Seniors who turn 62 during the years of no COLA are hit with the full brunt of the compounding loss and stand to lose the most.
Aggravating the situation is the fact that, although general inflation is low, seniors' living costs have increased, especially due to rising Medicare premiums.
Lifetime Social Security Benefits an Average Senior Will Lose Due to No/Low COLAs(1)
| Year of Birth | 62-Year-Old Retiree | 66-Year-Old Retiree | |
|---|---|---|---|
| 1946 | -$30,163.60 | -$39,152.50 | |
| 1947 | -$31,436.10 | -$39,463.20 | |
| 1948 | -$20,871.00 | -$26,130.60 | |
| 1949 | -$8,908.90 | -$11,141.30 | |
| 1950 | -$2,229.20 | -$2,880.90 | |
| 1951 | -$463.00 | -$648.70 | |
(1) Low COLA is defined as less than 2.8 percent, which is the average COLA paid from 1975 through 2009. This chart shows how much low or no COLA will affect benefits over a 20-year (for those retiring at age 66) or 25 year (for those retiring at age 62) retirement.
"Large numbers of seniors will be at risk of outliving their retirement income and being pushed into poverty due to an unprecedented combination of economic factors," said Larry Hyland, chairman of The Senior Citizens League. "The Senior Citizens League is adamantly opposed to deficit reduction proposals that would cut COLAs. Instead, Congress needs to pass an emergency COLA provision or guarantee a minimum average COLA to prevent this disturbing erosion in Social Security benefits."
The Senior Citizens League also recommends that any legislation that changes how Social Security benefits are calculated is devised in a way that is fair to all, to prevent inequities between retirees close in age.
Insights, Analysis, and Developments
Editorial Note: The study underscores a harsh reality: economic policies and market forces can have decades-long consequences for retirees. While COLAs were designed as a safeguard, their absence during periods of low inflation - despite rising healthcare costs - exposes vulnerabilities in Social Security's structure. For seniors and disabled individuals relying on fixed incomes, this isn't just a financial setback; it's a systemic failure demanding urgent legislative action to protect those most at risk of poverty in later life. - Disabled World (DW).Attribution/Source(s): This quality-reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its relevance to the disability community. Originally authored by The Senior Citizens League and published on 2010/12/16, this content may have been edited for style, clarity, or brevity. For further details or clarifications, The Senior Citizens League can be contacted at seniorsleague.org NOTE: Disabled World does not provide any warranties or endorsements related to this article.