May Signal Zero COLA for 2016
An unusually steep drop in inflation has slightly improved the buying power of Social Security benefits this year — by about 9%. But despite the temporary improvement, Social Security benefits have still lost 22% of their buying power since 2000, according to the 2015 Survey of Senior Costs recently released by The Senior Citizens League (TSCL).
The findings show a dramatic drop in inflation from January of 2014 to January of 2015 — due almost entirely to the drop in oil prices. The deflationary trend, while making the price of petroleum products more affordable in the short term, could spell trouble ahead next year for retired and disabled beneficiaries who depend on Social Security for most of their income. The last time the drop in inflation was this steep was in 2009 — when no cost of living adjustment (COLA) was payable the following year. In fact, the drop in inflation is now so deep that TSCL’s Social Security policy analyst and Advisor editor, Mary Johnson, forecasts that the COLA for 2016 will be around zero. Going without any COLA is like going without interest on savings and results in a lower Social Security income over time, due to the loss of compounding.
Despite the big drop in costs related to petroleum prices, the overall costs typical of Social Security recipients continue to grow faster than benefits. Since 2000, the COLA has increased benefits just 43 percent while typical senior expenses have jumped 74 percent. Inflation has been at historic lows in recent years and seniors received a COLA of just 1.7 percent this year.
A person with average Social Security benefits in 2000 received $816 per month, a figure that rose to $1,166.30 by 2015. However, that individual would require a Social Security benefit of $1,419.00 per month in 2015 just to maintain his or her 2000 buying power, the study found.
What costs are the fastest-rising since 2000? Here’s the top five:
- Homeowner’s insurance — up 161%
- Home heating oil —up 159%
- Natural gas — up 133%
- Medicare Part B premiums — up 131%
- Ground chuck — up 130%
What cost increases should you keep an eye on in 2015? Prescription drugs! To learn more see “Unprecedented Generic Drug Price Spikes Wreaking Havoc.”