Michelle ThompsonSocial Security benefits inject a substantial sum of money into the United States economy, with over $1.4 trillion distributed to over 67 million Americans in the previous year alone. This program, constituting approximately 5% of the nation’s gross domestic product, offers a financial boost that plays a crucial role in sustaining the economy. Beneficiaries use their payments to buy goods and services, which, in turn, generates additional income for businesses and employment opportunities for workers. This is why the annual cost-of-living adjustment for Social Security recipients is of great significance.
Commencing in January, Social Security beneficiaries will experience a 3.2% increase in their monthly payments. This increment is notably smaller compared to the inflation-driven raises seen in the previous two years, as revealed by the Social Security Administration in their recent announcement.
Retirees can anticipate a $59 uptick in their monthly payments, resulting in an estimated average of $1,907. This adjustment is indicative of the milder inflation experienced this year. In the preceding two years, recipients had received more substantial increases of 8.7% for 2023 and 5.9% for the previous year, marking the most significant raises since the early 1980s.
Before the Bell had a conversation with David Certner, the legislative counsel and policy director at AARP, to explore the potential impact of these adjustments on the economy.
[This interview has been condensed for brevity and clarity.]
Before the Bell: How does the Social Security Administration determine these adjustments?
David Certner: The Social Security Cost-of-Living Adjustment (COLA) is calculated based on the Consumer Price Index for urban wage earners. They assess the year-over-year changes for the third quarter, which concluded in September, to determine the adjustment. So, they analyze the data for July, August, and September to arrive at the 3.2% cost of living adjustment.
Before the Bell: The last two annual adjustments were quite significant. What’s the significance of the decrease in 2024?
David Certner: The purpose of COLA is to ensure that Social Security benefits maintain their value over time in the face of rising prices. Inflation was notably high over the past few years. When you have high inflation, there’s both good and bad news concerning COLA. Last year, we witnessed one of the largest adjustments in history, which was a substantial increase for recipients. The downside is that higher inflation is detrimental, especially for seniors living on fixed incomes. COLA helps counterbalance this, but it doesn’t necessarily improve one’s financial position.
Before the Bell: Could you explain what you mean by “it never helps you get ahead”?
David Certner: This is certainly a sentiment we often hear from our members. They welcome the increase, as it is crucial for their financial well-being, but no one feels that it adequately keeps up with their rising expenses.
One of the expenses growing most rapidly is healthcare, which tends to be a major cost for seniors, as you can imagine. Healthcare costs tend to increase at a faster rate than inflation. Last week, Social Security saw a 3.2% increase, but the standard Medicare premium, which can be even higher, rose by nearly 6%.
For most seniors, this premium is automatically deducted from their Social Security checks, consuming a significant portion of that increase.
Before the Bell: So, how does having more money in seniors’ pockets impact the economy?
David Certner: The impact is substantial because Social Security constitutes the primary source of income for most seniors. The majority of the funds distributed on a monthly basis are spent and circulate back into the economy. The GDP generated by Social Security payments is, in fact, greater than the total amount of Social Security funds being disbursed.
Regarding where this money goes, seniors tend to allocate most of it to fundamental areas such as housing, healthcare, utilities, and food.
Before the Bell: Could an increase in Social Security potentially contribute to inflation since it boosts the economy?
David Certner: This is why some people might be concerned about increasing payouts. However, in many ways, this is a self-sustaining mechanism because, over the past few years, we’ve not only seen rising prices but also rising wages. Increased wages mean more payroll taxes are being paid into the Social Security system. So, the system naturally corrects itself in this regard.
Before the Bell: What are some of the most prevalent misconceptions about Social Security?
David Certner: Many people focus on single-year increases in Social Security payments. But what’s truly critical is how these payments grow over time. If you’re taking your benefits at age 65 or 67 and will be drawing them for the rest of your life, you must consider the growth over a 20- or 30-year span. It’s one thing to lose 3% in purchasing power in one year, but if you examine the cumulative effect of COLA over several years, it can add up to approximately 18%. This has a significant impact on purchasing power.
The inherent effect of COLA is absolutely vital in maintaining the value of the benefit, particularly as people age and increasingly rely on Social Security as they deplete or exhaust other assets.
Rite Aid has Submitted a Bankruptcy Filing.
Rite Aid has filed for Chapter 11 bankruptcy protection, which comes as a result of a challenging environment for drug stores. This was further exacerbated by its second-place position in the industry compared to larger chains and costly legal battles related to allegations of filling unlawful opioid prescriptions, according to a report by my colleague David Goldman.
The bankruptcy filing wasn’t unexpected, as its larger competitors, CVS and Walgreens, are also grappling with similar issues. They have been closing stores in response to competition from Amazon and major retailers like Walmart, Target, and Costco, which offer more customer-friendly alternatives to national pharmacy chains.
However, Rite Aid’s financial situation is far worse than that of its competitors, making it unable to withstand the ongoing challenges facing the industry. In a filing with the US Securities and Exchange Commission on Thursday, Rite Aid announced its inability to submit its latest quarterly financial report, stating it was exploring “strategic alternatives,” a term often used on Wall Street to indicate a company’s consideration of bankruptcy.
The company noted in the filing that it expected a significant increase in losses for the past quarter. This is noteworthy, considering that it incurred losses of around three-quarters of a billion dollars between March 2022 and March 2023, as well as an additional $307 million between March and May of the current year. Over the past six years, Rite Aid has accumulated nearly $3 billion in losses.
As of the beginning of June, the last time the company filed a financial report, Rite Aid had just $135.5 million in cash on hand but carried $3.3 billion in long-term debt, which exceeded the value of the company’s assets by almost $1 billion. With rising interest rates, servicing this debt became increasingly expensive.
Neil Saunders, the managing director of GlobalData, commented, “It was always a matter of when, not if, Rite Aid would file for bankruptcy. The company has been deep in the red for the past six years.”
Taylor Swift’s ‘Eras’ Has Established A New Box Office Record for a Concert Movie.
Taylor Swift has added another achievement to her impressive list of accomplishments: box-office sensation.
In its debut weekend, the concert film “Taylor Swift: The Eras Tour” earned approximately $96 million in the United States and Canada, as reported by AMC, the movie theater chain that also serves as the film’s distributor. This makes it the highest-grossing concert film for an opening weekend in the domestic market, according to AMC.
AMC anticipates that “Eras” will continue to draw large audiences for weeks to come, as stated by Elizabeth Frank, the company’s executive vice president of worldwide programming and chief content officer.
Internationally, “Eras” also generated around $32 million in sales. It secured the top spot at the box office in several countries, including the United Kingdom, Mexico, Australia, Germany, and the Philippines. The film is scheduled for release in Brazil, South Korea, Malaysia, Singapore, Taiwan, and Hong Kong on November 3.
The $96 million in domestic box office sales significantly outperformed other movies, including “The Exorcist: Believer” and “Paw Patrol: The Mighty Movie.”
