I'm flipping through our Horseshoe Bay paper and I come across a fluff piece written by the local Edward Jones broker titled, "COLA is sweet for Social Security recipients." I'm on Linkedin the other day and one of my financial advisor peers posts, "Social Security payments are getting their biggest BOOST in 40 years." The financial services industry is trying to spin the bump in social security payments like its "manna from heaven".
The boost in social security payments is actually a curse, not a blessing. Do members of the financial services industry not understand the simple fact that retirees had to live with and endure "an adjustment to their cost of living" for an entire year before Social Security gave them a "cost of living adjustment"? The food retirees bought, the gasoline they purchased, the meds they needed for survival....all went up in cost 12 months ago, and just now they are getting a windfall?!?!
One of the very first posts I made on this website is titled "The CPI lie" which covers the seven overt ways the Bureau of Labor Statistics manipulates the CPI downward thus underpaying retirees participating in Social Security. But in the post, I didn't cover perhaps the most egregious failing of the CPI. And that is the fact that US Citizens must live with inflation for a year before adjustments are made to their pensions, social security income, and other inflation-adjusted payments.
Over time, this lag could have a considerable impact on the livelihood of retirees who largely depend on social security. Let us consider a person retiring and starting her social security payments at age 67. And let's assume her social security payment is $2500/month, she lives an additional 19 years (average life expectancy for a 67-year-old female), and inflation averages 5% throughout her retirement. In this scenario, the delay in COLA will cost her right at $50,000 over the span of her lifetime. That is an average of $2500/year or one month's income which she loses out on each year because of the lag.
So while my peers continue to celebrate yet another scheme to defraud our nation's seniors, I have taken a different tack. My firm is proactively hedging inflation by investing in the very securities that cause CPI to go up. While inflation has been nill for quite some time, most financial advisors have failed to identify and properly hedge inflation. However, we were out in front of the inflation surge. We have a proven process for hedging inflation based on research conducted by the Yale International Center for Finance. If you would like information on our approach, please contact us by submitting a form on this website or by calling our office at 512-553-5151.