Social Security Rise to Be Among Lowest in Years

Social Security COLA (FILE - In this Feb. 11, 2005 file photo, trays of printed social security checks wait to be mailed from th
Bradley C. Bower/AP

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 past year.

The exact size of the cost-of-living adjustment, or COLA, 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 COLA 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 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.

David Waugh of Bethesda, Md., said he can handle one small COLA but several in a row make it hard to plan for unexpected expenses.

SOCIAL SECURITY COLA (Graphic shows annual Social Security cost-of-living adjustments; 2c x 3 inches; 96.3 mm x 76 mm;)"I'm not one of those folks that's going to fall into poverty, but it is going to make a difference in my standard of living as time goes by," said Waugh, 83, who retired from the United Nations. "I live in a small apartment and I have an old car, and it's going to break down. And no doubt when it does, I'll have to fix it or get a new one."

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, or CPI-W, 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 officially announced. 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, Vlasenko said.

"In years with high COLA's, a lot of that had to do with fuel prices and in some cases food prices. Neither of those increased much this year," Vlasenko said. "So that kept the lid on the overall increase in prices."

Gasoline prices are down 2.4 percent from a year ago while food prices are up slightly, according to the August inflation report. Housing costs went up 2.3 percent and utilities increased by 3.2 percent.

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?"

The cost of personal computers dropped by 10.6 percent over the past year, according the CPI-W.

That's a small consolation to Alberta Gaskins of the District of Columbia, who said she is concerned about keeping up with her household bills.

"It is very important to get the COLA because everything else you have in your life is on an upward swing, and if you're on a downward swing, that means your quality of life is going down," said Gaskins, who retired from the Postal Service in 1989.

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Reverse mortgage loans can meet your retirement needs if you currently own a home. Like the name "Reverse mortgage" implies, instead of making payments to pay-off a mortgage a reverse mortgage makes payments to you.

December 02 2013 at 2:25 PM Report abuse rate up rate down Reply

Another ridiculous AOL article that ignores the zero percent raise of 2010 and 2011. It is directly tied to the rate of inflation. Low, negative, or no inflation is a good thing. Can't have it both ways.

October 18 2013 at 3:45 PM Report abuse rate up rate down Reply

Add energy and food and you have a 10+% COLA..I guarantee you that when Obama's term is over, he will retire to Hawaii.

October 16 2013 at 10:46 PM Report abuse rate up rate down Reply

Seniors and Veterans seem to be Obama's punching bag. He shows he has no use for them and treats them like second class citizens. He must feel that he can not get their vote and simply doesn't care. It would be nice if he would realize he is president of all the people in the US and not just president of the Democrat Party!

October 15 2013 at 5:51 AM Report abuse +2 rate up rate down Reply

been to a grocery store or gas station lately?

October 15 2013 at 5:47 AM Report abuse +3 rate up rate down Reply

did you know that cola is figured different than it used to be? when figuring the cost of living they removed gas and food.. most people are unaware of this. the same is true of unemployment. its NOT how many are unemployed. but how many are collecting a check.. soooo- all thos whose benefits have run out are not counted.

October 15 2013 at 5:46 AM Report abuse +2 rate up rate down Reply
1 reply to nos2001's comment

The FEDs and the Administration manipulate all of the stats.

October 16 2013 at 4:23 PM Report abuse rate up rate down Reply


October 15 2013 at 12:16 AM Report abuse rate up rate down Reply

I do not know what job in the Postal Service Alberta Gaskins but I am pretty sure she made more than my Dad who was a janitor for the Postal Service. He retired with a pension and was not eligible for social security due to such government pension. As I worked my way through college my Dad was able to help. My Mom was a stay at home mother. When he retired my Dad had paid off their home, car and every bill they had. Without social security but with a small pension my parents bought a home cash in Florida and were never in debt. They never spent more than they had almost $100,000 in bank savings when they passed away. If you live within your means you can get by.

October 14 2013 at 11:44 PM Report abuse +2 rate up rate down Reply

George Will a conservative columnist describes the republican party today as being weird and paranoid.

demsbaitnswitch3, is a perfect example.

October 14 2013 at 11:10 PM Report abuse +1 rate up rate down Reply

The republican party has set a new record for having the lowest approval rating in history. That should help them out in 2014............LMAO!!!!!!!!!!!!!!!!!!

October 14 2013 at 10:46 PM Report abuse +2 rate up rate down Reply