This year, Social Security and SSI recipients will have a very small cost of living increase. The release of the figure was delayed for a week by the recent government shut down. Social Security benefits for 2014 will rise 1.5 percent for 63 Million Americans in January, giving retired and disabled workers an average raise of $19 a month to keep up with the cost of living.
The increase is among the smallest since automatic adjustments were adopted in 1975, and reflects the fact that consumer prices haven’t gone up much in the past year. The annual cost-of-living adjustment, or COLA, is based on a government measure of inflation that was released Wednesday. See this Washington Post story for more analysis and comment: http://www.washingtonpost.com/business/social-security-set-to-announce-annual-cola-benefit-increase-to-be-among-lowest-in-years/2013/10/30/90360a82-4127-11e3-b028-de922d7a3f47_story.html
The 1.5 percent cost-of-living adjustment (COLA) will begin with benefits that more than 57 million Social Security beneficiaries receive in January 2014. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2013. Based on the increase in average wages, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $117,000 from $113,700.
The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation. It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), comparing consumer prices in July, August and September each year with 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. there is no increase, there can be no COLA. The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.
The Washington Post notes that since 1975, annual Social Security raises have averaged just over 4 percent. Next year will mark only the seventh time the COLA has been less than 2 percent. This year’s increase was 1.7 percent. There was no COLA in 2010 or 2011 because inflation was too low.
The COLA is calculated by comparing consumer prices in July, August and September each year with 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.
Since 1975, annual Social Security raises have averaged just over 4 percent. Next year will mark only the seventh time the COLA has been less than 2 percent. This year’s increase was 1.7 percent. There was no COLA in 2010 or 2011 because inflation was too low.
Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975. Before that, benefits were increased only when Congress enacted special legislation.