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Published: 10/13/2013 - Updated: 6 months ago

Social Security raise estimate only 1.5%

ASSOCIATED PRESS
The exact size of the cost-of-living adjustment won’t be known until the Labor Department releases the inflation report for September. The report was delayed indefinitely because of the partial government shutdown. The exact size of the cost-of-living adjustment won’t be known until the Labor Department releases the inflation report for September. The report was delayed indefinitely because of the partial government shutdown.
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WASHINGTON — For the second straight year, millions of Social Security recipients, disabled veterans, and federal retirees can expect historically small increases in their benefits come January.

Preliminary figures suggest a benefit increase of roughly 1.5 percent, which would be among the smallest since automatic increases were adopted in 1975, according to an analysis by the Associated Press.

Next year’s raise will be small because consumer prices, as measured by the government, haven’t gone up much in the last year.

The exact size of the cost-of-living adjustment won’t be known until the Labor Department releases the inflation report for September. That was supposed to happen Wednesday, but the report was delayed indefinitely because of the partial government shutdown.

The adjustment is usually announced in October to give Social Security and other benefit programs time to adjust January payments.

The Social Security Administration has given no indication that raises would be delayed because of the shutdown, but advocates for seniors said the uncertainty was unwelcome.

Social Security benefits have continued during the shutdown.

More than one-fifth of the country is waiting for the news.

Nearly 58 million retirees, disabled workers, spouses, and children get Social Security benefits. The average monthly payment is $1,162.

A 1.5 percent raise would increase the typical monthly payment by about $17.

The cost-of-living adjustment, or COLA, also affects benefits for more than 3 million disabled veterans, about 2.5 million federal retirees and their survivors, and more than 8 million people who get Supplemental Security Income, the disability program for the poor.

Automatic COLAs were adopted so that benefits for people on fixed incomes would keep up with rising prices. Many seniors, however, complain that the COLA sometimes falls short, leaving them little wiggle room.

Since 1975, annual Social Security raises have averaged 4.1 percent.

Only six times have they been less than 2 percent, including this year, when the increase was 1.7 percent. There was no COLA in 2010 or 2011 because inflation was too low.

By law, the cost-of-living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation, and education.

The COLA is calculated by comparing consumer prices in July, August, and September each year to prices in the same three months from the previous year. If prices go up over the course of the year, benefits go up, starting with payments delivered in January.

This year, average prices for July and August were 1.4 percent higher than they were a year ago, according to the CPI-W.

Once the September report, the final piece of the puzzle, is released, the COLA can be announced officially. If prices continued to slowly inch up in September, that would put the COLA at roughly 1.5 percent.

Several economists said there were no dramatic price swings in September to significantly increase or decrease the projected COLA. That means the projection shouldn’t change by more than a few tenths of a percentage point, if at all.

Polina Vlasenko, a research fellow at the American Institute for Economic Research, projects the COLA will be between 1.4 percent and 1.6 percent. Her projection is similar to those done by others, including AARP, which estimates the COLA will be between 1.5 percent and 1.7 percent. The Senior Citizens League estimates it will be about 1.5 percent.

Lower prices for gasoline are helping to fuel low inflation, Ms. Vlasenko said.

Advocates for seniors say the government’s measure of inflation doesn’t accurately reflect price increases older Americans face because they tend to spend more of their income on health care. Medical costs went up less than in previous years but still outpaced other consumer prices, rising 2.5 percent.

“This [COLA] is not enough to keep up with inflation, as it affects seniors,” said Max Richtman, who heads the National Committee to Preserve Social Security and Medicare. “There are some things that become cheaper but they are not things that seniors buy. Laptop computers have gone down dramatically but how many people at 70 are buying laptop computers?”



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