Update 10/30/13: It’s official. The SSA just announced that the benefit increase for 2014 will be 1.5%. You can see the press release here.
Many Seniors and other Social Security beneficiaries may not know it yet, but the expected Social Security increase for 2014 is 1.5 percent. The Announcement was scheduled for October 16, but the SSA couldn’t do so because of the government shutdown.
Joyce Rogers, AARP senior vice president for government affairs, said she hopes that Social Security recipients will not be adversely affected by the delayed announcement and that the fiscal issues behind the delay are sorted out quickly….More at Shutdown Delays Announcement of Social Security COLA – AARP News (blog)
The 2014 cost of living allowance (COLA) is one of the smallest since 1975. While the increase is lower than the 2013 COLA (1.7%), it’s still better than no COLA at all, which happened in 2010 and 2011.
With the cost of prescriptions, Medicare and medical care going up all the time, many wonder how the COLA increase can be so low.
The COLA calculation is based on the average CPI-W for the third quarter of the current year over the average for the third quarter from the previous year. If there was an increase, Social Security recipients will receive an increase in benefits; if there is no increase in the CPI-W, then there is no COLA.
For the record, inflation, as measured by the CPI-W, has been low over the past 12 months, running at around 1.6%. Read Latest Cost-Of-Living Adjustment. Also, read CPI For Urban Wage Earners And Clerical Workers.
Unfortunately, the CPI-W doesn’t adequately reflect the living costs of seniors as it doesn’t include health care costs in it.
The Bureau of Labor Statistics produces another measure geared to specifically measure the living costs of seniors, called the CPI-E, or experimental Consumer Price Index for the Elderly.
It tracks the cost of the basket of goods seniors actually consume, taking into account, among other things, the higher health care costs for seniors. It rises about 0.2 percentage points more per year on average than the current CPI, thereby better protecting beneficiaries against inflation.
The higher rate is largely because seniors — and people with disabilities — have, on average, higher medical costs, and those costs have been rising more rapidly than other goods and services….More at Chained-CPI Supporters Believe This Year’s Tiny Social Security Cost of Living … – Huffington Post
There’s not much you can do if you are already collecting Social Security benefits, but according to this MarketWatch article, you can minimize the impact of small COLA increases by delaying your Social Security benefits for as long as possible. Not only does this increase the base amount that increases are figured on, but your benefits will increase by 8% for every year that you defer them, regardless of the annual COLA amount.