In January 2013, the more than 56 million Americans receiving Social Security benefits are set to receiving an increase in their monthly payments. The increase, known as the cost of living adjustment (COLA), will be 1.7 percent, which averages out to about $19 per month or $230 per year. The adjustment is reportedly one of the smallest since cost of living adjustments began to be made back in 1975.
The various programs within Social Security will each see an increase because of the adjustment, though at different levels. Payments for retired workers and their family members are slightly higher than average, at about $1,237, so the increases are usually slightly larger. Disabled workers receive slightly less on average, so their adjustments are slightly smaller.
Individuals receiving Supplemental Security Income-Social Security’s disability program for the poor-also receive a cost of living adjustment. Roughly one if five Americans are affected by the increase. .
The current political and economic landscape holds a degree of uncertainty when it comes to cost of living adjustments. Congress has recently considered changing the way it calculates cost of living adjustments. The change would involve adopting a new inflation index that would result in lower annual payments.
Last year, President Obama has mentioned the idea during deficit reduction talks, and presidential candidate Mitt Romney has said he would slow growth for people with “higher incomes,” though he has not defined what “higher incomes” means nor how he would slow their growth.
As those receiving Social Security benefits known, annual cost of living adjustments are very important to the financial stability of those that rely on them. Increasing costs of food, utilities, and health care and the continuing instability of the economy make such adjustments as important as ever.
Source: Associated Press, “Social Security benefits get a 1.7 percent bump,” Stephen Ohlemacher, October 16, 2012