Those collecting social security and disability benefits can expect only about a 1.7%-2% increase in their COLA (cost of living adjustment) next year. For most people this translates to around $20 more a month. 2015 will be the third year in a row that the government will be doling out historically small increases, which are based (by law) on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. This is “a broad measure of consumer prices generated by the Bureau of Labor Statistics,” which measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education from July-September from one year to the next. Simply put, if prices rise over the course of the year, benefits go up, beginning with payments delivered in January.
Automatic increases for Social Security beneficiaries were enacted by Congress in 1975, when inflation was high and there was a lot of pressure to regularly raise benefits.
Among the costs examined are medical and lower fuel costs. Yet, while overall prices for food have risen by less than 3%, the prices for meat, fish, dairy and eggs has risen by nearly 9%. Still, many older Americans relying on Social Security are feeling the squeeze of minute benefit increases year after year, and advocates for senior citizens claim that the government's measure of inflation “doesn't accurately reflect price increases faced by older Americans because they tend to spend more of their income on health care. In addition, although the rise in medical costs seems to have slowed in recent years, that may be little comfort to someone who is suddenly hit with a serious illness.
"You lose that increase, not only in the short-term, you lose the compounding over time," said Mary Johnson of The Senior Citizens League. "For the middle class, for people that don't qualify for low-income programs, they are dipping into savings or they are borrowing against their homes."
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