Benefit Bulletin: September 2012

Benefit Bulletin: September 2012

With Inflation Dropping —  Low 2013 COLA Forecast

The prospects for an adequate Cost-of-Living Adjustment (COLA) boost for 2013 are dimming.  The rate of inflation, as measured by the Consumer Price Index (CPI), is decelerating at the fastest pace in three years.  A low COLA would leave the seniors, especially those with the lowest Social Security benefits, with less money to cover Medicare premiums that are automatically deducted from monthly payments.

The 2013 COLA will be announced October 16, 2012.  Based on CPI-W data through June 2012, TSCL's Advisor editor Mary Johnson forecasts that the COLA payable next year will be about 1.4% - 1.5%.  That would make it one of the lowest COLAs paid in the 38 years since the COLA became automatic.

Despite the slowing of the CPI, earlier this year, Medicare actuaries estimated that the base Part B premium paid by most seniors will climb about 8%, from $99.90 per month to $109.10, starting next January.

Even though the rate of inflation is dropping, a proposal that would switch to a more slowly-growing CPI to calculate COLA continues to be pushed by proponents on both sides.  The Congressional Budget Office has estimated that the "chained" CPI would reduce the federal budget deficit by more than $220 billion in the first ten years.  It would do so by cutting the growth in a host of federal benefit programs, including military retirement in addition to Social Security, as well as increasing revenues if used to index the tax code.

TSCL believes that legislative changes that would switch to the chained CPI and cut COLAs will be a key feature of deficit reduction talks and plans that become public after the November elections.  You can help!  Sign TSCL's Social Security Fairness Petition online or call 1-800-333-TSCL (1-800-333-8725) to have a petition mailed to you.