Senior citizens are braced for Tuesday’s announcement of how much more money they will get from Social Security, an automatic increase that is expected to come in at less than 2%, one of the smallest since the Cost of Living Adjustment first began in 1975.
The increase, also known as a COLA, is tied to the rise of consumer prices, which has been running at an annual rate of about 1.5%, according to federal figures. The formal announcement, which will include September’s rate of inflation available on Tuesday, is expected to be around that number.
Benefits for retired workers average $1,237 a month, meaning the typical retiree can expect an increase of between $12 and $24 a month, according to the Associated Press. In an email, the Social Security Administration on Monday refused to discuss the announcement until Tuesday.
While the announcement will determine payments made to seniors, the larger impact of the adjustment could be political, rather than economic.
The role of the social safety net has been a key part of this year’s electoral cycle, along with taxes and how to cut the federal debt. Democrats and Republicans have sparred over funding for Social Security and Medicare, the healthcare program for the elderly, and both issues that could make an electoral difference in battleground states, especially Florida.
Automatic adjustments were established in 1975 as a way to protect seniors from inflation, according to the Social Security Administration’s website. It also ties any increase to a mathematical computation rather than the give-and-take of politics. Before 1975, Congress was responsible for approving any increase in Social Security payments.
“The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation,” according to the Social Security Administration. “It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.”
In 2012, the about 55 million Social Security beneficiaries received a COLA hike of 3.6%, which was the first increase since 2009. Officials will compare inflation numbers for July, August and September of this year to the same period in 2011 to determine the adjustment. Since 1975, the annual COLA has averaged 4.2% and has been below 2% five times.
According to the Bureau of Labor Statistics, price increases have been low. Food has increased by around 2% while home energy prices have dropped. Housing and gasoline prices over the period have increased but by less than 2%.