COLA Announcement Delayed Due To Shut Down
Seniors will receive an estimated 1.5% cost-of-living adjustment (COLA) effective January 1st. This preliminary estimate was recently released by TSCL and shared by other economists and senior advocates. The exact size of the COLA has yet to be announced due to the recent government shutdown.
A COLA of 1.5% will boost the average monthly Social Security benefit of $1,161 by only $17.40 per month. But despite slow growth in benefits, TSCL remains highly concerned that COLA cuts could become part of budget deals in addition to disruptions associated with hitting the debt limit.
As this issue of The Social Security & Medicare Advisor was prepared for release, no agreement to lift the federal budget debt limit has been reached. Although seniors have continued to receive their Social Security payments during the government shutdown, and the federal government has never defaulted or failed to meet its obligations — there could be a first time.
At this writing it remains unclear what would happen if the federal debt limit were to be hit. Secretary of the Treasury Jacob Lew, a Trustee of the Social Security Trust Fund has repeatedly warned that the government will not have sufficient funds to meet its obligations — including payment of Social Security and Medicare benefits — unless the debt ceiling is lifted by October 17th.
Nearly 58 million beneficiaries rely on COLAs to protect the purchasing power of their Social Security benefits. The past five years mark the most sluggish COLA growth period since COLAs became automatic in the 1970's. The loss of growth in COLAs comes at the same time bank CDs and savings are paying almost zero interest, and home real estate has yet to regain pre-crash values. Seniors have been forced to draw down retirement savings much more rapidly than they ever planned or to keep working in order to meet living costs that rise far more rapidly than the government's inflation index seems to indicate.
In fact, seniors have lost almost one-third of their buying power since 2000, according to TSCL's 2013 Survey of Senior Costs. Since 2000, the COLA increased benefits just 38 percent while typical senior expenses have jumped 81 percent, more than twice as fast.
COLA cuts have been under discussion in Congress for months. In July, House Ways and Means Chairman Dave Camp released a draft of legislation that would use a more slowly - growing measure of inflation, the "chained" consumer price index (CPI) to calculate the annual boost.