2017 COLA Forecast Maybe Lowest Ever Paid

Author: The Senior Citizens League
Published: 2016/10/12 - Updated: 2024/03/27
Publication Details: Peer-Reviewed, Announcement, Notification
Topic: U.S. Social Security - Publications List

Page Content: Synopsis - Introduction - Main

Synopsis: 2017 COLA expected to raise Social Security benefits by only a few dollars, any increase will be offset by increases in Medicare Part B premium for most people 65 and over. A major reason that the COLA is so low is the consumer price index that the government uses to calculate the increase. Under current law, the COLA is tied to the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That index surveys the spending patterns of younger working adults and does not include the market basket of goods and services that is more typical of people age 62 and over.

Introduction

After no annual cost of living adjustment (COLA) this year, older Americans are likely to get a boost for 2017. But the increase will be so small that it will be the lowest ever paid, according to a new forecast by The Senior Citizens League (TSCL).

Main Item

The 2017 COLA will likely be 0.3 percent says Mary Johnson, a Social Security policy analyst and researcher for TSCL.

"And there's a chance that lower gas prices will drag the COLA down even further, to 0.2 percent," Johnson adds.

Either way, the 2017 COLA is expected to raise Social Security benefits by only a few dollars, and any increase will be completely offset by stiff increases in the Medicare Part B premium for most people 65 and over.

COLAs have flat - lined at unprecedented lows over the past 7 years, averaging just 1.2 percent a year. That's less than half the 3 percent that COLAs averaged from 2000 to 2009.

"The low growth in Social Security benefits since 2009 has a significant impact on overall retirement income of anyone who has been retired since that year," Johnson says. "For people retired over the past seven years, monthly benefits in 2016 are today 13 percent lower than if inflation had been the more typical 3 percent per year. In dollar amounts, that's $150 per month lower for someone with average benefits," she adds. "This is huge and this loss of anticipated retirement income compounds every year causing people to spend through retirement savings far more quickly than planned. Over the course of a 25 or 30 year retirement, it reduces anticipated Social Security income by tens of thousands of dollars. Unfortunately this financial impact is not fully understood by the vast majority of the public and Members of Congress - The Senior Citizens League is working to change that," Johnson notes.

A major reason that the COLA is so low is the consumer price index that the government uses to calculate the increase. Under current law, the COLA is tied to the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That index surveys the spending patterns of younger working adults and does not include the market basket of goods and services that is more typical of people age 62 and over.

The CPI-W gives greater weight to goods and services that younger workers spend more on, like gasoline prices and electronics, which have dramatically dropped in price over the past two years. It gives less weight to housing and medical expenses even though those two categories have experienced bigger price jumps over the past two years, and are the two biggest spending categories for older consumers.

TSCL surveys confirm that costs for older Americans continued to climb despite no COLA this year. A recent TSCL survey found that 72 percent of respondents reported that their monthly household expenses rose by more than $79 in 2015.

TSCL is working to convince Congress to enact a bill that provides an emergency COLA. The organization supports the Seniors and Veterans Emergency (SAVE) Benefits Act (S. 2251, H.R. 4144), which would provide Social Security beneficiaries with a one-time emergency COLA of 3.9 percent. For the average retiree, the emergency COLA would amount to around $580 dollars.

Attribution/Source(s): This peer reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its relevance to the disability community. Originally authored by The Senior Citizens League and published on 2016/10/12, this content may have been edited for style, clarity, or brevity. For further details or clarifications, The Senior Citizens League can be contacted at SeniorsLeague.org NOTE: Disabled World does not provide any warranties or endorsements related to this article.