NY African Americans Facing Devastating Cuts to Retirement Income


While Congress continues to debate how to address the nation’s debt, older African Americans could be facing a threat to their economic well-being should lawmakers decide to adopt a proposed change called a Chained CPI that would reduce Social Security benefits.

A Chained CPI (Consumer Price Index) would disproportionately affect older African Americans receiving Social Security because African American retirees rely more on the benefit for their total household income than older Whites. African Americans are less likely to receive other sources of retirement income such as pensions, retirement accounts like 401k’s or IRA’s, or income from other sources such as interest or dividends, making them more vulnerable to be plunged into poverty and forced to make difficult choices between things like buying food or prescription drugs.

For African Americans, Social Security makes up a significant share of their family income.  A third of African Americans rely on Social Security for more than 90 percent of their income, while for a quarter of African Americans, Social Security is their only source of income.  This is in comparison to 14 percent of older Whites relying on the benefit for all of their income.

“For the 3 million African Americans nationwide and the 8 out of 10 African Americans over the age of 65 that receive Social Security here in New York State, the Chained CPI represents an erosion in financial Security for those who simply cannot afford it,” said Dionne Polite , Associate State Director for Multicultural Outreach for AARP New York.  “Social Security is a vital source of income for older African Americans and AARP is calling on Congress to reject it.”

A reduction in benefits could plunge more older African Americans into poverty. Currently, Social Security keeps over 30 percent of older African Americans out of poverty. For those who struggle to stay out of poverty, a benefit cut like the Chained CPI could disproportionately push more African Americans over the poverty line than older Whites. The poverty rate for older African Americans is 17 percent, more than double the rate for whites, which stands at 7 percent.

The disparity is largely due to the lack of other sources of retirement income and the lower amount of average Social Security monthly benefits that African Americans receive compared to that of whites.

“Social Security cuts via a Chained CPI snowball over time, and as prices rise, the move forces older African Americans to do more with less, taking billions out of the pockets of current and near retirees, working families, veterans and the disabled,” added Polite. “This outcome of this debate could have very serious local consequences in Staten Island. AARP believes that Congress needs to reject this shortsighted change and instead find responsible ways to address our nation’s budget challenges.”

A Chained CPI (consumer price index) contains changes to the formula used to determine Social Security’s annual Cost of Living Adjustment (COLA), assuming that when prices for one thing goes up, people settle for cheaper substitutes (for example, if beef prices go up, they’ll buy chicken). The “substitution” theory under a Chained CPI is inaccurate as most seniors can’t simply trade down in their spending on prescription drugs, utilities and other fixed expenses. Moreover, the chained CPI compounds over time, reducing benefits by an even larger amount every year. For example, the average Social Security recipient who starts collecting benefits at age 65 would see their benefits cut by more than $600 over the next 5 years.  Over ten years, the cut would grow to more than $2000.

In New York State, the Chained CPI would take $7 billion out of the pockets of New York State’s Social Security beneficiaries, and over $2 billion from beneficiaries in New York City.

In the face of ever-increasing prices for health care, home heating, gasoline and grocery bills, asking seniors to give up more and more of their Social Security benefit as they age when every dollar counts is just plain wrong.