After receiving no cost-of-living adjustment (COLA) this year, Social Security beneficiaries will finally receive a raise effective January 1st. But the increase in benefits is so small, it will be the lowest payable COLA ever in the history of the program — raising a $1,000 benefit by just $3.00.
The new low comes as COLAs have flat-lined over the past seven years, averaging just 1.2% — less than half the 3% average over the two decades prior to 2010. The long-term financial impact on anticipated retirement benefits is significant and growing, says TSCL’s Executive Director, Shannon Benton. “People lose the effect of compounding when benefit raises are at these extreme lows,” she explains. “That reduces the Social Security income that retirees may have been counting on over their retirement.”
According to TSCL estimates, benefits are now 13% lower this year than if inflation had remained the more typical 3% for retirees who have been receiving Social Security since 2009 when the low COLAs started. A Social Security benefit of $1,000 in 2009 is about $142 per month lower today than if COLA had been the more typical 3%, with a total loss of about $6,697 in Social Security benefit growth over the past seven years. Over the same period, however, actual senior costs have continued to climb. Some 72% of retirees who participated in TSCL’s 2016 Senior Survey reported that their monthly expenses had gone up by more than $79 in 2015, despite the lack of growth in inflation.
“The need for an Emergency COLA has never been greater,” says Benton. TSCL is meeting with Congress to urge lawmakers to enact emergency legislation to provide a COLA large enough to boost benefits in 2016 and 2017. In addition, TSCL is asking Members of Congress to pass legislation that would use a senior consumer price index, the Consumer Price Index for the Elderly (CPI-E), to more fairly calculate the annual boost.
Sources: 0.3% COLA Announced, The Social Security Administration, October 19, 2016. “Long Term Impact of Low COLA Growth,” Mary Johnson, TSCL, August 31, 2016.
