Social Security recipients shouldn't expect a big increase in monthly benefits come January. Preliminary figures show the annual benefit boost will be between 1 percent and 2 percent, which would be among the lowest since automatic adjustments were adopted in 1975.
Monthly benefits for retired workers now average $1,237, meaning the typical retiree can expect a raise of between $12 and $24 a month.
The size of the increase will be made official Tuesday, when the government releases inflation figures for September. The announcement is unlikely to please a big block of voters -- 56 million people get benefits -- just three weeks before elections for president and Congress.
The cost-of-living adjustment, or COLA, is tied to a government measure of inflation adopted by Congress in the 1970s. It shows that consumer prices have gone up by less than 2 percent in the past year...
This year, Social Security recipients received a 3.6 percent increase in benefits after getting no increase the previous two years.
Some of next year's raise could be wiped out by higher Medicare premiums, which are deducted from Social Security payments. The Medicare Part B premium, which covers doctor visits, is expected to rise by about $7 per month for 2013, according to government projections.
The premium is currently $99.90 a month for most seniors. Medicare is expected to announce the premium for 2013 in the coming weeks...
How important is the COLA? From 2001 to 2011, household incomes in the U.S. dropped for every age group except one: those 65 and older.
The median income for all U.S. households fell by 6.6 percent, when inflation was taken into account, according to census data. But the median income for households headed by someone 65 or older rose by 13 percent.
"That's all because of Social Security," David Certner, AARP's legislative policy director, said. "Social Security has the COLA and that's what's keeping seniors above water, as opposed to everybody else who's struggling in this economy"...
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education...
By law, the Social Security Administration compares the price index for July, August and September with consumer prices in the same three months from the last year in which a COLA was awarded. A COLA was awarded a year ago, so the index from July, August and September of this year is being compared with the index from the same period in 2011.
If prices go up over the course of the year, benefits go up, starting with payments delivered in January. But if prices go down, benefits stay the same. That's what happened in 2010 and 2011, when there was no COLA.
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Editor's Note: Everyone be prepared for the Obama Administration's "creative math" on Tuesday...
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