The 1.7 percent cost-of-living adjustment that the country’s 56 million Social Security beneficiaries and 1.9 million federal retirees will receive next year will not add much money to most household budgets, but advocates for seniors fear that worse news could be around the corner if the annual increases are targeted as part of deficit-reduction efforts.
The 2013 COLA increase announced Tuesday by the Social Security Administration is significantly lower than the 3.6 percent increase for 2012. There was no increase in the previous two years.
“While this modest increase will help, much of the COLA will be consumed by health care and prescription costs, which continually outpace inflation,” Nancy LeaMond, AARP executive vice president, said in a statement. “Every day, retirees and other beneficiaries struggling to make ends meet still feel like they’re falling further behind.”
AARP has attacked suggestions from Capitol Hill that the enormous deficit could be reduced by changing the way the cost-of-living adjustment is calculated.
“Any proposal to decrease the COLA as part of a deficit reduction deal ignores the real struggles facing many seniors today, and would exacerbate their financial hardships with each passing year,” LeaMond said.
Sixty-five percent of Americans who receive Social Security depend on it for at least half of their income, according to the Senior Citizens League.
“They count on every single penny of their annual COLA boost,” said Mary Johnson, policy analyst for the league. “Even so, a 1.7 percent COLA will not increase benefits by much, leaving little left over after paying rising Medicare premiums.”
Seniors and disabled beneficiaries face rising food, health-care and heating costs in the coming year. “What I expect to see is a big erosion of buying power,” Johnson said.
Already, seniors have lost more than one-third of their buying power since 2000, according to an annual survey of senior costs conducted by the league.
“The benefits are eroding,” Johnson said. “They’re dipping into their savings.”
Since automatic annual adjustments began in 1975, the annual COLA increase has averaged 4.5 percent. But low inflation has kept the increases low in recent years, including the zero increases in 2010 and 2011.
“That was unprecedented,” Johnson said. “That was hard on everybody.”
Johnson said that until recent price increases, especially for fuel, there was speculation that there would be no COLA increase in 2013.