Alexandria, VA (Oct 16, 2012) Seniors will get one of the lowest cost-of-living adjustment (COLA) paid in the past decade next January. But even so, COLAs remain a key target in post-election deficit reduction efforts, warns The Senior Citizens League (TSCL), one of the nation’s largest nonpartisan seniors groups. A plan that would slow the growth in annual COLAs is a key provision of major deficit reduction plans quietly under consideration in Congress.
According to the Social Security Administration, beneficiaries will receive a 1.7% COLA starting in January of next year. The low COLA comes close on the heels of two years when no COLA was paid, in 2010 and 2011. The COLA in 2012 was 3.6%. “The anemic growth in benefits will cause tens of millions of seniors to spend a bigger portion of their monthly Social Security payment on healthcare and other costs next year,” says TSCL Chairman Larry Hyland.
The proposal to cut the growth of COLAs formed a major Social Security reform provision of President Obama’s 2010 Fiscal Commission. It would reduce the growth rate in COLAs by switching to the more slowly-growing “chained” CPI. “The switch is insidious because it’s enormously complicated to figure out, and it looks so small on paper — just 0.03 tenths of a percentage point,” Hyland observes. “But the loss compounds over time. Within a decade it would have a significant financial punch that just keeps getting bigger,” Hyland explains. The following chart provided by TSCL illustrates the impact of a chained CPI on a married couple’s Social Security benefits, which start at a total of $2,500 per month today, and how their benefits change over the first ten years. After ten years the chained CPI would reduce benefits by $88 per month, and would cut benefits by $5,488 over the ten-year period.
How “Chained” CPI COLA Cut Compounds Over Ten Years
Under Current Law
|Monthly Benefit Using “Chained” CPI||Monthly Difference||Annual Difference|
|Total over ten years||(-$5,487.90)|
“Seniors can’t afford to sit still and allow lawmakers to use COLA cuts to reduced the federal budget deficit,” Hyland says. TSCL is organizing a grass-roots movement to fight the plan. To sign a petition or to learn how you can take part, visit TSCL on the web at www.SeniorsLeague.org.
With about 1 million supporters, The Senior Citizens League is one of the nation's largest nonpartisan seniors groups. Located just outside Washington, D.C., its mission is to promote and assist members and supporters, to educate and alert senior citizens about their rights and freedoms as U.S. Citizens, and to protect and defend the benefits senior citizens have earned and paid for. The Senior Citizens League is a proud affiliate of The Retired Enlisted Association. Please visit www.SeniorsLeague.org or call 1-800-333-8725 for more information.