Millions of Social Security recipients and federal retirees will get only tiny increases in benefits next year, the fifth year in a row that older Americans will have to settle for historically low raises.
There was no increase this year. Next year's benefit hike will be small because inflation is low, driven in part by lower fuel prices. The COLA affects more than 70 million people — about one in five Americans.
The federal government is scheduled to announce the cost-of-living adjustment, or COLA, Tuesday morning. By law, the COLA is based on a government measure of consumer prices. Preliminary numbers suggest a COLA of less than 1 percent, according to analyses by experts and The Associated Press.
The average monthly Social Security payment is $1,238. That adds up to a monthly increase of maybe $3 or $4 a month.
More bad news: Medicare Part B premiums, which are usually deducted from Social Security payments, are expected to increase next year to the point in which they will probably wipe out the entire COLA.
By law, the dollar increase in Medicare's Part B premium cannot exceed a beneficiary's cost-of-living raise. That's known as the "hold harmless" provision, and it protects the majority of Medicare recipients, who have their premiums deducted from their Social Security checks.
But another federal law says that the Part B premium must raise enough money to cover one-fourth of expected spending on doctors' services. That means that a minority of beneficiaries, including new enrollees and higher-income people, have to shoulder the full increase. Their premiums would jump.
Millicent Graves, a retired veterinary technician, says Medicare and supplemental insurance premiums eat up nearly a third of her $929 monthly Social Security payment. And don't tell the 72-year-old from Williamsburg, Virginia, that consumer prices aren't going up. She says her insurance premiums went up by $46.50 this year, and her cable TV, Internet and phone bill went up, too.
"I just lose and lose and lose and lose," Graves said.
More than 60 million retirees, disabled workers, spouses and children get Social Security benefits. The COLA also affects benefits for about 4 million disabled veterans, 2.5 million federal retirees and their survivors, and more than 8 million people who get Supplemental Security Income, the disability program for the poor. Many people who get SSI also receive Social Security.
Since 2008, the COLA has been above 2 percent only once, in 2011. It's been zero three times.
"This loss of anticipated retirement income compounds every year, causing people to spend through retirement savings far more quickly than planned," said Mary Johnson of the Senior Citizens League. "Over the course of a 25- or 30-year retirement, it reduces anticipated Social Security income by tens of thousands of dollars."
By law, the cost-of-living adjustment 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.
The COLA is calculated using the average CPI-W for July, August and September. If prices go up, benefits go up. If prices drop or stay flat, benefits stay the same.
The numbers for July and August suggest a COLA of just 0.3 percent. The numbers for September are to be released Tuesday.