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Cost of living raise in Social Security benefits among lowest in years

Social Security benefits will see a low cost of living increase this year, as with other years in the past.  All payments are automatically adjusted for a cost of living increase.
Social Security benefits will see a low cost of living increase this year, as with other years in the past. All payments are automatically adjusted for a cost of living increase.
www.outsidethebeltway.com

If you are a recipient of Social Security payments, don’t expect much in the way of a raise this year. For two years, disabled veterans and federal retirees will see a small increase of 1.5 percent in January.

The figures are the smallest since automatic increases were implemented in the system in 1975, according to The Associated Press analysis. Why?

The small raise in payments is due to the cost of living adjustment. An inflation report released by the Labor Department will be known after the government shutdown. The Labor Department has delayed the report because of the partial shutdown and won’t be releasing the data until a compromise opens the government again.

Reports of inflation increases or decreases are traditionally announced in October, which gives Social Security and various programs to reflect the change in payments sent out in January. To date, the Social Security Administration has not announced the first-of-the-year raises would be delayed because of the shutdown, however, the situation in Washington plays a large part in the Social Security checks as of now.

Over one-fifth of the country receives benefits or would be affected by the outcome of the Social Security Administration’s closure.

Advocates for seniors are at the top of the list for negative feedback on the situation.

With nearly 58 million retirees, disabled workers and spouses and children receiving Social Security benefits, the average payment is approximately $1,162. The 1.5 percent raise increases the average payment by about $17.

The cost of living adjustment affects over 3 million disabled veterans and approximately 2.5 million federal retirees and their families. More than 8 million people receive benefits from the Supplemental Security Income program, which is a program for disabled poor people.

The automatic cost of living adjustment program was implemented to keep up with the rising cost of living year-by-year. Seniors tend to have a difficult time with the fixed income plan when the cost of living adjustment is shortened more than one year. Often, the automatic adjustment falls short of the actual cost of living increases, leaving seniors without the money they need to live.

Since the automatic increases were introduced into the system, annual raises have averaged 4.1 percent. The system has been lacking in the raises about six times, making the payments under 2 percent. The automatic raises did not happen in 2010 or 2011 because the cost of living remained too low.

The adjustment is automatically based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which gives a measure that is quite broad, based on consumer prices produced by the Bureau of Labor Statistics. The measurements cover price changes in food, housing, clothing, transportation, energy, medical care, recreation and education.

Consumer prices are compared in the months of July, August and September annually and to prices in the same three months of the previous year. When the listed variables go up, so do the Social Security payments in January.

So far this year, the average prices for July and August show a 1.4 percent hike when compared to last year. This puts the focus on the month of September that will not be released until the shutdown enables the administration to release the data. If the prices in September show a slow increase, the cost of living adjustment will be roughly 1.5 percent.

Programs such as the AARP and the Senior Citizens League estimate the raise will be about 1.5 percent. The American Institute for Economic Research suggest the adjustment will fall between 1.4 and 1.6 percent, especially since the lower prices for gasoline help lower fuel inflation data.

Americans are paying less for gas from what we paid last year at the pump, while food prices are on a slight rise. Housing costs Americans about 2.3 percent more than a year ago and utilities saw an increase of about 3.2 percent over last year.

Advocates for seniors state the increase does not reflect a good picture of what seniors need for living expenses. Most of their income goes toward health care. Medical costs stayed almost the same as previous years but have risen above other consumer prices. Medical costs have risen about 2.5 percent.