No COLA for Seniors on Social Security: Government
Shutdown Delays Calculation
Oct. 10, 2013 - The U.S. Department of Labor has
issued a short statement saying it will not be issuing the September
results for the Consumer Price Index, because of the government
shutdown. This means they will not be calculating the cost-of-living
allowance for Social Security beneficiaries in 2014. No alternative date
With only the cost of living change for September
to go to complete the calculation, the 2014 COLA (cost-of-living
allowance) is still expected be about 1.5%.
“If this proves to be correct, 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,” according to Shannon Benton,
Executive Director of The Senior Citizens League.
“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.
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.
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 “What’s
the Chained CPI”.)
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