¿The End of Indexation as We Know It?

And no, I’m not talking about that fancy little section in the back of your textbook! You know, the section that guides us in answering our homework questions because reading the chapter is so overrated especially when How to Get Away With Murder is on!!!

I’m talking indexation, the economic term that basically means that each year you should receive a little extra dough in your pockets in order to account for how the prices of the things we purchase each and every day increase overtime. Or as Webster more eloquently states, “the automatic adjustment of wages, taxes, pension benefits, interest rates, etc., according to changes in the cost of living or another economic indicator, especially to compensate for inflation.” (By the way, it’s a noun for those intellectuals who are wondering!! 😉 )

So what does this indexation have to do with me or you? Well, if you are not a social security recipient, then this may only effect you indirectly, but for those receiving their monthly allotments of social security monies, then this just may be of some concern…

The other day, ole CNN notified my celly (and me!) that those receiving social security payments will not be receiving an indexation for the upcoming 2016 New Year which leads us to the first question: “why are indexations received anyways?” Well, simply put, it’s because the goods and services we produce, purchase, and utilize are usually not the same price year after year. They, in fact, increase. That being said, our second question becomes: “why do prices increase annually?” Honestly, and not to elude, but it could be a plethora of reasons…

For example: Everyone demanding tons of iPhone’s while Apple is only willing to produce four.

indexation capital gain

Or Hurricane Watermelondrea sweeping in and destroying all of the corn crops this side of the Mississippi! 😉indexation for capital gainOf course, there are more factors, but these certainly take the cake and make it easier to understand, right?

All jokes aside, however, prices do have a tendency to inflate, or increase, frequently. Therefore, the government and oftentimes, many private entity employers, take a liking to compensating their SS recipients and employees by increasing their salaries a tad. Now don’t go running to your bo$$ asking where your indexation is or why it isn’t that high because Shimmy Sistah says it should be! 😐 Usually this increase does occur annually but it is only slight – implying that you may notice an extra $50 bucks or more per paycheck beginning each year. Small, but eh, I’ll take it! 🙂 Plus, as we can tell, some may not even receive anything at all which leads us into our third question: “why is this so?” Fortunately, I tasked my students with finding out and they didn’t disappoint!

Social Security payments according to Investopedia (2015), are “the monetary benefits received by retired workers who have paid into the social security systems during their working years. [They] are paid out on on a monthly basis to retired workers and their surviving spouses.” These payments, as noted, are distributed from what you put in, but that doesn’t mean the government can’t let you hold a little something extra when the prices of the goods and services increase. But what if the prices of the goods and services we purchase go down or deflate? What happens then? What happens when gas is only $1.89 this year as opposed to the $2.99 we were paying in 2014? What does the government do in THIS case?

They opt out, of course! 😉 Consequently, they say “hey, gas prices have gone down substantially due to US extraction, the prices of goods and services have leveled out and have even decreased in some instances, and your zills have gone on sale! So guess what?!? We ain’t forking over anymore dough for 2016…” In other words, no indexation…

To some, this is actually a good sign indicating our economy isn’t doing so bad after all. Unemployment is relatively low, candy corn is affordable, and pumpkin this and that never tasted so good; however, what if something happens next year? What if Watermelondrea DOES come and leaves us with a daunting economy and skyrocketing price increases? Without the indexation received, how are those social security recipients to manage? Not to sadden you, but those are concerns we definitely need to consider.

Nevertheless, I’m sure that with spending within our means instead of purchasing that beguiling Aston Martin, we should fare just fine as we continue to Live Life, Beautifully!

Remember to Live Life, Beautifully 

Street Cred goes toooooooooooooooo…………………

http://www.investopedia.com/terms/i/indexation.asp

http://wwlp.com/2014/12/31/gas-prices-2014-year-in-review/

http://www.investopedia.com/terms/s/social-security-benefits.asp

http://dictionary.reference.com/browse/indexation?s=t

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