Seniors To Get One of Lowest COLAs Ever to be Paid

Seniors To Get One of Lowest COLAs Ever to be Paid

Will 1.7% COLAs Become The New Norm?


Food, energy, and healthcare costs are climbing, but starting in January Social Security recipients will get one of the lowest cost-of-living adjustment (COLA) ever paid — just 1.7%.  The low COLA comes close on the heels of none at all in 2010 and 2011, and a 3.6% COLA this year.  The critical annual boost, relied upon by the majority of beneficiaries, is unlikely to be sufficient to offset rising Medicare premiums and other healthcare costs, leaving beneficiaries to dig deeper into savings.

Despite anemic COLAs in recent years, a proposal that would permanently reduce the growth rate in future COLAs remains a key provision of many deficit reduction plans.  The proposal has won support from President Obama, who recently said he was "still eager to reach an agreement based on the principles of my bipartisan debt commission." The proposal, which would switch to a more slowly - growing "chained" consumer price index (CPI) to determine the annual change, has proponents from both sides of the aisle.  They argue that the current CPI used to calculate COLAs overpays Social Security recipients because it doesn’t take into account how consumers change their spending when prices increase.

But a major study of senior cost data, performed for TSCL, indicates that COLAs are trailing behind the increases in the costs that seniors and disabled beneficiaries typically have.  Since 2000, Social Security recipients have lost 34% of their buying power because the COLA has not grown as quickly as the goods and services upon which they spend most of their income.

COLAs have been major targets of deficit reduction efforts in the past.  In the late 1990's, the Bureau of Labor Statistics made a number of major changes to the way it calculates the consumer price index.  By the start of 2000, both the Council of Economic Advisors and the Congressional Budget Office estimated that the changes reduced the measured rate of inflation by about 0.7 percentage point.

Those changes cut the growth of Social Security benefits that all beneficiaries receive over a retirement.  Since 2000 the change reduced benefits by almost 7%, and that will continue to grow.  For example, in 2000, the average monthly benefit was $816.  Had the government not changed the CPI methodology, people receiving $816 per month in 2000 would get $78.90 per month more today — $1,189.80 instead $1,110.90.  For someone retiring in 2000 with $816 who lives into his or her 90s and collects benefits for 30 years, the loss in monthly benefits is projected to grow steeply to $331.80 per month — a cut of more than 17%.

"With the majority of seniors depending on Social Security for at least half of their income, retirement security begins with a COLA that more adequately protects benefits from steeply rising prices," says TSCL Executive Director, Shannon Benton.  TSCL believes Social Security beneficiaries need a COLA that more accurately reflects their true costs, and supports legislation that would provide a more fair and adequate COLA.  To learn more about proposals that would cut COLAs, visit

How you can help:  Share your story!  Help TSCL publicize why rising costs are a hardship for seniors. Send us a message listing your top five biggest cost changes from one year ago, and the choices you are facing over the coming year.
Sources:  Social Security Administration, October 16, 2012.  The Consumer Price Index:  Recent Improvements and Prospective Changes, Congressional Research Service, January 18, 2000, RL30019.