This chart assumes a 1.5% increase in the
Social Security COLA for 2014 and estimates increases
Social Security News
Senior Citizen League Projecting Small 1.5% COLA for
Social Security in 2014
SSA should make it official on October 15, after
September CPI is calculated; advocates keeping close eye on chained CPI
proposed by Obama, CPI for elderly ignored for years
By Tucker Sutherland, editor, SeniorJournal.com
TSCL Executive Director
Oct. 3, 2013 Senior citizens will get a very
small increase in their Social Security benefit next year, according to
the current projection by The Senior Citizens League. With only the cost
of living change for September to go to complete the calculation, the
2014 COLA (cost-of-living allowance) will be about 1.5%, according to
Shannon Benton, Executive Director of TSCL. The official word from SSA
is expected on October 15.
If this proves to be correct, says Benton, then
the average COLA paid over the past five years was 1.4%. This would be
a record low period since the COLA became automatic.
The purpose of the COLA, according to SSA, 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) from the third quarter of the last
year a COLA was determined to the third quarter of the current year. If
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.
For purposes of determining the COLA, the average
CPI-W for the third calendar quarter of the last year 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.
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.
This year, there is a focus among senior citizens
and their advocates on the change of several CPIs, since President Obama
suggested earlier that the annual COLA should be based on an inflation
measure known as the Chained CPI which is identified as C-CPI.
The chained CPI, according to AARP, measures
living costs differently because it assumes that when prices for one
thing go up, people sometimes settle for cheaper substitutes (if beef
prices go up, for example, they'll buy more chicken and less beef).
Bottom line: Cost-of-living adjustments would be
lower with the chained CPI than with the plain old CPI. So depending on
which formula is used, the amount of your Social Security payments could
change over time.
How much could payments change? Estimates show
that under the chained CPI, your cost-of-living adjustment (COLA) would
be about .3 percentage point below the plain old CPI. That works out to
$3 less on every $1,000, which doesn't sound like much except that it
keeps compounding over time.
AARP, like virtually all senior organizations,
opposes the change to the C-CPI. (Read Whats
the Chained CPI.)
From December 1982 through December 2011, the all-items CPI-E
rose at an annual average rate of 3.1 percent, compared with
increases of 2.9 percent for both the CPI-U and CPI-W.
several reasons that older Americans faced slightly higher
inflation rates over the past 29 years.
First, older Americans
devote a substantially larger share of their total budgets to
medical care. The share of expenditures on medical care by the
CPI-E population is roughly double that of either the CPI-U
population or the CPI-W population. In addition, over the
19832011 period, medical care inflation increased significantly
more than inflation for most other goods and services (5.1
percent annually for medical care, compared with 2.8 percent for
all items less medical care).
Second, older Americans spend
relatively more on shelter, and during the last 29 years shelter
costs have modestly outpaced overall inflation.
Although the CPI-E generally outpaced the official measures of
inflation over the 19832011 timeframe, recent trends show
different results. From 2006 to 2011, both the all-items CPI-E
and the CPI-U rose at an average annual rate of 2.3 percent,
while the CPI-W increased 2.4 percent.
This turnaround was
caused primarily by changes in the relative inflation rates of
medical care and shelter, compared with the overall inflation
rate. Specifically, the gap between medical care inflation and
overall inflation has generally fallen since 2005, and shelter
inflation has been rising slightly more slowly than overall
inflation over the 20062011 period.
The Consumer Price Index for the Elderly
The Bureau of Labor Statistics says it calculates
official price indexes for two population groups.
One is the Consumer Price Index for All Urban Consumers (CPI-U),
which represents the spending habits of about 88 percent of the
population of the United States.
The other is the CPI for Urban Wage Earners and Clerical Workers
(CPI-W), a subset of the CPI-U population, which represents about 29
percent of the U.S. population.
BLS also calculates an experimental CPI for the
elderly, or CPI-E, by using households whose reference
person or spouse is 62 years of age or older. In 20092010,
approximately 24 percent of all consumer units met the CPI-E's
definition of having a reference person or spouse 62 years of age or
The TSCL, like most of the advocacy groups, are
watching all three of these CPIs to monitor the impact of the Social
The CPI-E has been rising slowly but steadily,
more quickly than the CPI-W, in recent months, says TSCL Executive
Director Benton,.. We suspect that medical costs are once again
starting to rise and causing the slight increase.
Here is the current tracking by TSCL of the
increase of the three
CPIs in 2013.
Below is a chart showing the annual COLA since 1975
Automatic Cost-Of-Living Adjustments
July 1975 -- 8.0%
July 1976 -- 6.4%
July 1977 -- 5.9%
July 1978 -- 6.5%
July 1979 -- 9.9%
July 1980 -- 14.3%
July 1981 -- 11.2%
July 1982 -- 7.4%
January 1984 -- 3.5%
January 1985 -- 3.5%
January 1986 -- 3.1%
January 1987 -- 1.3%
January 1988 -- 4.2%
January 1989 -- 4.0%
January 1990 -- 4.7%
January 1991 -- 5.4%
January 1992 -- 3.7%
January 1993 -- 3.0%
January 1994 -- 2.6%
January 1995 -- 2.8%
January 1996 -- 2.6%
January 1997 -- 2.9%
January 1998 -- 2.1%
January 1999 -- 1.3% January 2000 -- 2.5%(1)
January 2001 -- 3.5%
January 2002 -- 2.6%
January 2003 -- 1.4%
January 2004 -- 2.1%
January 2005 -- 2.7%
January 2006 -- 4.1%
January 2007 -- 3.3%
January 2008 -- 2.3%
January 2009 -- 5.8%
January 2010 -- 0.0%
January 2011 -- 0.0%
January 2012 -- 3.6%
January 2013 -- 1.7%
COLA for December 1999 was originally determined as 2.4 percent
by the Bureau of Labor Statistics. Pursuant to Public Law106-554,however,
this COLA is effectively now 2.5 percent.
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