Social Security benefits to be increased by 1.7% in 2015
Americans who rely on federal benefits will get a 1.7% increase in their monthly payments in 2015, the US government announced on October 22.
It’s the third year in a row the increase will be less than 2%.
The annual cost-of-living adjustment (COLA) affects payments to more than 70 million Social Security recipients, disabled veterans and federal retirees. That’s more than a fifth of the country.
The increase amounts to about $20 a month for the typical Social Security recipient.
The government announced the benefit increase on October 22, when it released the latest measure of consumer prices. By law, the increase is based on inflation, which is well below historical averages so far this year.
For example, gasoline prices have dropped over the past year while the cost of clothing is up by less than 1 percent, according to the September inflation report released today.
The cost of meat, fish and eggs is up by nearly 10%, but the overall cost of food is up just 3.1%.
Medical costs, which disproportionately affect older Americans, are up 1.9% over the past year.
Americans who rely on federal benefits will get a 1.7 percent increase in their monthly payments in 2015
Congress enacted automatic increases for Social Security beneficiaries in 1975, when inflation was high and there was a lot of pressure to regularly raise benefits.
For the first 35 years, the COLA was less than 2% only three times. Next year, the COLA will be less than 2% for the fifth time in six years. This year’s increase was 1.5%, the year before it was 1.7 percent.
Social Security is financed by a 12.4% payroll tax on the first $117,000 of a worker’s wages – half is paid by the worker and half is paid by the employer. Next year, the wage cap will increase to $118,500, the Social Security Administration said.
About 59 million retirees, disabled workers, spouses and children get Social Security benefits. The average monthly payment is $1,192.
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.
By law, 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.
The COLA is calculated by comparing consumer prices in July, August and September each year with prices in the same three months from the previous year. If prices go up over the course of the year, benefits go up, starting with payments delivered in January.