Sixth Years of Record Low COLAs
Unprecedented, Says Senior Citizens League
20, 2014 - The annual Social Security cost-of-living adjustment (COLA)
will remain at record low levels again in 2015, says a new forecast by
The Senior Citizens League (TSCL).
According to the most recent consumer price index (CPI) data through
August, TSCL forecasts that COLAs will be 1.7 percent in 2015. “That
would make the sixth consecutive year of record low COLAs,” states TSCL
Chairman, Ed Cates. “That’s unprecedented since the COLA first became
automatic in 1975,” he notes.
Over the past five years COLAs have
gone flat, along with the inflation index used to calculate them.
Inflation has been growing so slowly that the annual increase has
averaged only 1.4 percent per year since 2010. That’s less than half the
3 percent average during the prior decade. In 2010 and 2011, benefits
didn’t increase at all. A 1.7 percent increase next year would not pull
up the five-year average.
While there’s still a month to go
before the COLA announcement in October, and inflation data will likely
change with the September CPI data, TSCL estimates that there’s only a
small chance that it would greatly affect the 1.7 percent estimate. “The
2015 COLA will most likely be stuck in the low range of 1.6 to 1.8
percent,” Cates says.
Although the annual adjustment is
provided to protect the buying power of Social Security payments,
beneficiaries are reporting a big disparity between the boosts they
receive and growing costs. According to a recent national survey by
TSCL, the majority of Social Security recipients said that their
benefits rose by less than $19 in 2014, yet their monthly expenses rose
by more than $119. A 1.7 percent increase would only boost average
Social Security benefits by about $20 next year.
According to a TSCL study, Social
Security beneficiaries have lost 31 percent of their buying power since
2000. 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 and can mean a somewhat lower initial
retirement benefit. A recent analysis for TSCL calculates that the past
five years of low COLAs have impacted average Social Security benefits
by about $3,942 since 2009, when compared with more normal levels of 3
According to the analysis, average
benefits rose from $1,062 per month in 2009 to $1,135.70 per month in
2014. But had COLAs been the 3 percent norm, benefits would have
increased to $1,231.10 per month — $95.40 more.
Despite the lack of growth in
Social Security benefits, COLA reductions remain a key proposal under
consideration in Congress to reduce Social Security deficits. A leading
proposal would use the more slowly – growing “chained” consumer price
index to calculate the annual increase. In the past, the government has
made numerous changes to the methodology it uses to calculate consumer
price increases. Those changes since the late 1990s have already
resulted in lowering the measured rate of inflation by 0.7 percentage
point per year, according to the Congressional Budget Office.
TSCL warns that the “chained COLA”
proposal may come under debate again soon. The Social Security Trustees
recently 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 a reduction in disability benefits of 20 percent.
Instead, TSCL supports legislation that would provide a more fair and
adequate COLA by using the Consumer Price Index for the Elderly (CPI-E)
to determine the annual boost.
To learn how COLA cuts could affect
your retirement income, try TSCL’s chained COLA calculator. Visit TSCL’s
website at www.SeniorsLeague.org.
About The Senior Citizens League
With about 1 million supporters, The Senior Citizens
League says it is one of the nation’s largest nonpartisan seniors
groups. Located just outside Washington, D.C., its mission is to promote
and assist members and supporters, to educate and alert senior citizens
about their rights and freedoms as U.S. Citizens, and to protect and
defend the benefits senior citizens have earned and paid for. The Senior
Citizens League is a proud affiliate of TREA The Enlisted Association.
www.SeniorsLeague.org or call 1-800-333-8725 for more information.
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