Senior Citizens League Warns of Low 2015 COLA
- Publish Date: 2014/08/07
- Author: The Senior Citizens League
- Contact : Ph. 1-800-333-8725
Outline: Low COLAs affect not only people currently receiving benefits, but also those who have turned age 60 and who have not yet filed a claim.
Main DigestThe Social Security Trustees recently forecast that benefits would grow by only 1.5% in 2015 - the same amount beneficiaries received this year, further weakening the buying power of tens of millions of beneficiaries.
U.S. Social Security and Supplemental Security Income (SSI) benefits are adjusted to reflect the increase, if any, in the cost of living as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) prepared by the Bureau of Labor Statistics (BLS). The purpose of the cost-of-living adjustment (COLA) is to ensure that the purchasing power of Social Security and SSI benefits is not eroded by inflation. For purposes of determining the COLA, the average CPI-W for the third calendar quarter of the last year a COLA was determined is compared to the average CPI-W for the third calendar quarter of the current year. The resulting percentage increase, if any, represents the percentage that will be used to increase Social Security benefits beginning for December of the current year. SSI benefits increase by the same percentage the following month (January). If the increase in the CPI-W is at least one-tenth of one percent (0.1 percent), there will be a COLA. However, if the CPI-W increases by less than 0.05 percent, or if the CPI-W decreases, there will not be a COLA.
Social Security recipients may be in for another record low cost-of-living adjustment (COLA) next year, warns The Senior Citizens League (TSCL). The Social Security Trustees recently forecast that benefits would grow by only 1.5% in 2015 - the same amount beneficiaries received this year. "A COLA that low further weakens the buying power of tens of millions of beneficiaries," says TSCL Chairman, Ed Cates. Yet COLA reductions remain a key proposal under consideration in Congress to reduce Social Security deficits.
According to a recent national survey by TSCL, the majority of Social Security recipients indicated that their benefits rose by less than $19 in 2014, yet their monthly expenses rose by more than $119 in 2013.
Since 2010 COLAs have been at record lows, averaging just 1.4%. That's less than half the 3% average during the decade prior to 2010.
Low COLAs affect not only people currently receiving benefits, but also those who have turned age 60 and who have not yet filed a claim.
The COLA is part of the formula used to determine initial benefits.
A new analysis for TSCL indicates that people who turned age 60 in 2009 will absorb the full brunt of the recent historic low COLAs. The analysis calculates that average monthly Social Security benefits since 2009 rose from $1,062 per month to $1,135.70 per month in 2014. But if retirees had received a more typical COLA of 3 percent, benefits would have increased to $1,231.10 per month - $95.40 more.
"Since 2009 individuals with average benefits would have received about $3,942 more if COLAs were the more average 3%," Cates says. "Unfortunately, the measurement of inflation used to determine COLAs has been subject to a great deal of government tinkering."
Methodological changes that the government has made to how it calculates consumer prices in the late 1990s have resulted in lowering the measured rate of inflation by about 7% according to the Congressional Budget Office. And leading proposal to reduce spending on Social Security would use an even more slowly growing "chained" consumer price index to calculate the increase.
That proposal may come under debate soon.
The Social Security Trustees also forecast that the Social Security Disability Trust Fund is facing insolvency by 2016, and that changes to the program will have to be made, to avoid reduction in disability benefits of 20%. TSCL urges Social Security beneficiaries to learn how the candidates stand on the COLA.
Here are three questions to ask the candidates:
- Research shows that the current Social Security COLA does not accurately represent the inflation that seniors experience. Do you support basing the COLA on an index specifically for the elderly
- Older Americans have lost more than 30% of their purchasing power since 2000. What is your position on using the "chained" CPI for the calculation of COLAs, which would reduce the measured rate of inflation
- The Social Security Trustees project that the Disability Insurance Trust Fund will be depleted in 2016. What do you feel should be done to restore this program's solvency
To learn how COLA cuts could affect your retirement income, try TSCL's chained COLA calculator. Visit TSCL's website at www.SeniorsLeague.org
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