WASHINGTON – Another year, another small raise for millions of people who rely on Social Security, veterans benefits and federal pensions.
Preliminary figures suggest that next year’s benefit increase will be roughly 1.5 percent, according to an analysis by the Associated Press. The increase will be small because consumer prices, as measured by the government, haven’t gone up much in the last year.
For the second year in a row, it would be one of the lowest raises since automatic adjustments were adopted in 1975.
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 shutdown of the government.
More than a fifth of the country is waiting.
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.
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 increases would be delayed because of the shutdown, but advocates for senior citizens said the uncertainty was unwelcome. Social Security benefits have continued during the shutdown.
David Certner of AARP said senior citizens are getting squeezed financially from many sides. Retirement portfolios took a big hit when the markets collapsed a few years ago, and even though the markets have rebounded, safer investments favored by older Americans are paying relatively low interest rates.
“Social Security COLAs have been low, and anybody who’s trying to live off interest rates and getting returns on any of the meager savings they have is getting killed because there’s no return on your CDs or other fixed-income assets,” Certner said. “The one bright spot is that health care costs have slowed down. But at least on the income side, it has been a pretty tough few years in terms of trying to keep up with expenses.”
Automatic COLAs were adopted so that benefits for people on fixed incomes would keep up with rising prices. Many senior citizens, however, complain that the COLA sometimes falls short, leaving them little wiggle room.
David Waugh, of Bethesda, Md., said that he can handle one small COLA but that several in a row make it hard to plan for unexpected expenses.
“I’m not one of those folks who’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, a retired United Nations employee.
Since 1975, annual Social Security increases 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 COLA 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.