Our readers have probably encountered references to the fiscal cliff and negotiations between Republicans and Democrats over how to best manage the economic situation. The fiscal cliff negations have encompassed a variety of related issues, and among them has been the way the Social Security Administration makes cost of living adjustments for its beneficiaries.
Back in October, the Social Security Administration announced the new cost of living adjustment for 2013, which is to average out to $19 per month, representing a 1.7 increase from 2012. Among the proposals related to the cost of living adjustment would be to switch to a calculation method that better measures inflation by assessing how consumers change their behavior in responding to changes in prices.
The proposal to change the way cost of living adjustments are made has been met by the opposition of those who say that it would cut benefits for senior citizens by thousands of dollars. This contention has been disputed, though.
For our purposes, the important thing to recognize about this issue is that cost of living adjustments are an important means of keeping Social Security beneficiaries out of poverty. Many beneficiaries rely on their payments as a primary source of income, and a significant reduction in cost of living adjustments could compromise the financial well-being of many beneficiaries.
Whatever our political leaders end up doing with this issue, it is hoped that they will remain sensitive to the importance of cost of living adjustments to those that rely on them.
Source: Marketwatch, "Chained CPI: Diet COLA for Social Security," December 20, 2012