Seniors looking at small cost-of-living boost
Retirees are getting a bump in their monthly Social Security checks next year, but it's a smaller raise than they saw in 2013.
The cost-of-living adjustment for 2014 will be 1.5%, down from the the 1.7% boost seniors saw this year.
That inches up the amount on monthly checks by about $19, which will put the average benefit at $1,280 per month.
Indeed, 2014 will mark the fifth out of the last six years that seniors have received a minimal cost-of-living increase — or none at all.
Cost of living adjustments are currently based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (or CPI-W), one of the government's main inflation measurements.
When that measurement shows little or no inflation, seniors get little or no bump in benefits.
Social Security Cost-of-Living Adjustments
|Source: Social Security Administration|
On Wednesday, the Labor Department released the Consumer Price Index for September.
Social Security bases its cost-of-living adjustments on the average CPI-W for the third quarter of the year.
The CPI was supposed to be released Oct. 16, but the government shutdown threw a kink in those plans.
Now that it's out, we know that prices as measured by that index increased just 1.2% from September to September, and the average annual inflation rate for the third quarter was 1.5%.
While the COLA has been tiny in recent years, it could be even smaller in the future.
Proposals from the Obama administration and Congress aim to determine the COLA by using what's called the "chained CPI," an index that rises more slowly than the CPI-W and results in a lower cost-of-living adjustment.
That reduction in Social Security benefits would "produce substantial savings to the federal budget," notes AIER, an independent research institute based in Great Barrington, Mass.
But it would also mean a few less bucks for seniors. The chained CPI for the third quarter shows an increase of about 1.4%, which would have raised the average retirement benefit by about $17 a month to $1,278.
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