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Tag: COLA

  • 2025: Social Security benefits up 2.5 percent

    2025: Social Security benefits up 2.5 percent

    Big news: The Social Security Administration just announced that the annual cost-of-living adjustment (COLA) for Social Security benefits will be 2.5%. That means that people receiving Social Security benefits will get slightly larger checks next year.

    If it were up to Republicans, Social Security benefits wouldn’t keep up with rising prices. If it were up to Republicans, seniors would have an even harder time getting by.

    Here are the facts:
    The automatic annual cost-of-living adjustment is one of Social Security’s most essential features. It is intended to ensure that benefits do not erode over time. However, the formula currently used to calculate annual COLAs under-measures the expenses that Social Security beneficiaries face.

    Seniors spend a greater proportion of their income on medical expenses―and the Social Security COLA should reflect that. Democrats in the House and Senate have introduced legislation that would update the COLA formula (among other improvements to Social Security) to reflect the real cost of living for seniors and people with disabilities.

    When Democratic presidential nominee Kamala Harris served in the Senate, she co-sponsored one of those bills. So did vice presidential nominee Tim Walz when he served in the House.

    Republicans have a different perspective. The Republican Study Committee (which comprises over 80% of House Republicans) proposes annual budgets that include Social Security cuts.

    The RSC budget explicitly calls the current COLA formula too generous. They think seniors deserve less.

    In fact, page 104 of the Fiscal Year 2025 Republican Study Committee Budget calls the automatic nature of COLAs a “problem” and implies that they should be subjected to annual Congressional approval―turning Social Security benefits into another fiscal deadline that they can take hostage, like the debt ceiling.

    Seniors need to know: Republicans think that today’s Social Security benefits are too high, and are willing to fight to lower them. 

    The bottom line is that Democrats want to make annual COLAs more accurate and generous, while Republicans want to make them stingier. Democrats also support other policies that would lower costs for Social Security beneficiaries, including Harris’s recently released plan to expand Medicare to include home care, hearing, and vision benefits. These are the facts that could determine the election.

    Here’s more from Just Care:

  • Social Security benefits should increase modestly in 2025

    Social Security benefits should increase modestly in 2025

    Social Security benefits should increase modestly in 2025. Andy Markowitz reports for AARP that we won’t know for sure what the Social Security cost of living increase will be in 2025 until October. But, preliminary numbers suggest an increase of close to three percent.

    In July, the Consumer Price Index was up 2.9 percent from the year before. The federal government bases its Social Security increase on the rise in the Consumer Price Index in July, August and September. Inflation is slowing down, so the increase in Social Security benefits may be closer to 2.6 percent.

    Prices remain high for lots of goods and services that older adults and people with disabilities need, including food and health care. So, some experts believe that August and September inflation numbers could bring up the Social Security COLA to as much as 3.25 percent.

    If Social Security benefits rise 2.9 percent, people will see, on average, an increase of $54 in their Social Security benefits, to $1,924, beginning in January. Survivor benefits would increase by $44 to $1,552, on average. Social Security Disability Insurance benefits (SSDI) would increase $45, on average, to $1,583.

    Social Security benefits are, thankfully, inflation-protected. Unfortunately, the cost-of-living increase calculation is based in large part on the basket of goods people under 65 purchase and not exclusively on the basket of goods older adults and people with disabilities need. Consequently, if health care costs rise faster than other goods, the Social Security adjustment is often not as large as it needs to be to make people with Medicare whole.

    In their 2024 Annual Report, Medicare’s Trustees predicted that the monthly Medicare Part B premium would increase from $174.70 to $185 in 2025. So, if the Social Security COLA increases by $54, on average, people will only see a $43.70 increase in their benefits. The other $10.30 will be deducted from their Social Security checks to cover the additional portion of their Medicare Part B premium.

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  • Congress needs to fix the glitch in Social Security

    Congress needs to fix the glitch in Social Security

    Conservatives are working to exploit a Social Security glitch caused by the economic crisis we are facing as a result of the coronavirus pandemic. Allies on Capitol Hill need a red alert to protect Social Security benefits. Social Security Works has launched an emergency campaign to ensure that Congress does not allow Social Security benefits to be cut.

    You earn your Social Security benefits. They are based on your individual earnings, adjusted so that they are in line with the growth in economy-wide wages.

    The way Social Security benefits are calculated is fair. Virtually all of the time, it works incredibly well. But our economy is collapsing as a result of the novel coronavirus pandemic.  The unprecedented economic collapse resulting from the pandemic has uncovered a technical glitch.

    If not corrected, the glitch will mean lower benefits for workers aged 60 this year (and their families) than those with the same earnings history but who had the good luck to celebrate their 60th birthdays last year. If it is not fixed, the Social Security benefits of more than four million workers and their families will be several thousand dollars lower simply because those workers were born in 1960, not 1959!

    The cause is complicated but, fortunately, the solution is simple and straightforward. Still, Congress must act to fix it. Congress should fix the glitch as part of the next emergency legislation.

    First the cause: Aggregate wage levels normally rise from year to year. Not surprisingly, in 1977, when Congress enacted the current benefit formula, it did not anticipate that there would ever be a drop in aggregate nationwide wages. Consequently, it did not write the benefit formula to address that possibility.

    Congress must now address that understandable oversight.

    Much as the Social Security cost of living adjustment (COLA) cannot lead to a reduction in Social Security benefits–even if inflation is negative, Social Security’s indexing of earnings should also not lead to a reduction in benefits, even if total wages in the US are declining. It’s a simple fix that would ensure that people turning 60 this year do not have lower Social Security benefits than people who turned 60 last year, simply because they turned 60 in the year of the pandemic.

    In fixing the glitch, though, Congress should act carefully so the legislation does not reduce anyone’s benefits.

    Conservatives want to take advantage of this glitch as cover to cut benefits. The cuts could be technical, if the fix is not well-drafted, or technical sounding, though anything but.  A longstanding goal of opponents of Social Security is to change the benefit formula in a way that would erode benefits–through something called price-indexing. Over time, with price-indexing, Social Security benefits would have no relationship to people’s earnings history. Instead, they would get an extremely low, subsistence-level benefit.

    Congress also should not support President Trump’s call to reduce or eliminate people’s Social Security’s payroll contributions. Those are dedicated funds that can only be used for Social Security. Eliminating them is a first step to cutting benefits, claiming, much like the defendant who murders his parents and asks for leniency as an orphan, that Social Security has insufficient revenue and so must be cut!

    Social Security today has a reserve of $2.9 trillion. It has the money to pay people’s earned benefits. Without Social Security, tens of millions of retirees and people with disabilities would be crushed by this pandemic.

    This pandemic underscores the need for Congress to expand Social Security. Fortunately, expanding Social Security is profoundly wise policy.  It is also what the American people overwhelmingly want.

    Here’s more from Just Care:

  • Social Security benefits will rise 2.8 percent in 2019, but checks may not

    Social Security benefits will rise 2.8 percent in 2019, but checks may not

    As a result of inflation, people on fixed incomes find that their incomes decline in value over time.  One extremely important feature of Social Security is that its benefits are adjusted every year automatically to offset increases in inflation, so that the modest, but vital, benefits do not erode over time.  It is important to understand that these adjustments are not increases.  They are intended to simply allow people to tread water, to maintain their purchasing power.

    Unfortunately, the government’s cost of living adjustment for Social Security is based on inflation experienced by workers and not by retirees and people with disabilities who are unable to work. Older people and people with disabilities have, on average, higher health care costs; those costs tend to rise considerably faster than overall inflation.  For that and other reasons, Social Security beneficiaries generally experience higher costs of living than workers, so Social Security adjustments are often inappropriately low.  Consequently, Social Security beneficiaries are not even treading water, but rather losing ground. Nevertheless, even inadequate adjustments are better than none.

    For 2019, Social Security beneficiaries will receive a cost of living adjustment or COLA of 2.8 percent, an average of $39 a month or $468 a year.  That is good news for Social Security beneficiaries, many of whom have little or no other income.  The bad news is that millions of people likely will not experience that full increase.

    Most people with Medicare who receive monthly Social Security benefits have their Medicare Part B premiums deducted directly from those Social Security payments.  For these people, Congress has provided that the annual increase in the Medicare Part B premium must be no larger than the Social Security cost of living adjustment or COLA.  (An exception to this rule is if you are higher income and subject to the Income-Related Higher Income Amount.)

    People who are protected can’t lose some of their Social Security benefits, but they can certainly see no cost of living adjustment, despite the 2.8 percent increase.  In 2018, about one quarter of beneficiaries saw no increase whatsoever and another 18 percent received a monthly benefit that was only $5.00 or less.

    People who do not have their Medicare premiums deducted automatically from their Social Security benefits can, indeed, wind up with less net income, despite the increase.  And, of course, in addition to premiums for health insurance covering doctors’ costs, there are premiums for prescription drugs, as well as costs for copays and deductibles.  As a result, instead of treading water, people are sinking below the surface.  Indeed, bankruptcies among those aged 65 and older are skyrocketing.

    This is unacceptable.  After a lifetime of work, Americans should have enough guaranteed Social Security to maintain their standards of living.  The solution is three-fold. First, Congress should enact a better, more accurate measure of inflation for people receiving Social Security benefits. In addition, benefits, which are modest, but vital, should be increased. Finally, Congress should improve Medicare by expanding it to cover such vital services as hearing aids, dental work, and vision care.  Premiums, copays, and deductibles should be eliminated.  And everyone should be covered.  Improved Medicare for All will improve the nation’s health outcomes while costing a fraction of what we pay today.

    It is long past time to enact a more accurate cost of living adjustment for Social Security, expand its benefits, improve Medicare, and extend it to everyone.  That is profoundly wise policy.  It also represents the views of the vast majority of us.

    If you want Congress to expand Social Security, please sign this petition.

    Here’s more from Just Care:

  • Social Security benefits barely rising in 2017

    Social Security benefits barely rising in 2017

    Social Security just announced the cost-of-living adjustment, COLA, for Social Security, and the news is bleak. Social Security benefits are barely rising. The typical older adult receiving benefits will see only a $4.00 increase in her monthly check. A new report from the National Academy for Social Insurance explains what you need to know about how Social Security benefits are calculated.

    In short, the COLA is supposed to ensure that people receiving Social Security checks continue to have the same purchasing power from one year to the next notwithstanding price inflation. Older adults in particular need this inflation protection since their savings and other income tends to fall as they age, including their pensions, and their dependence on Social Security increases. But, the Social Security COLA is not delivering adequate inflation protection to older adults.

    Here’s the history: The COLA was enacted into law in 1972 to guarantee people receiving Social Security annual inflation protection. But, the Bureau of Labor Statistics (BLS) produced only one Consumer Price Index or CPI to measure inflation. So, Congress used it to calculate the Social Security inflation adjustment even though it is not based on price inflation older adults experience. The CPI is based on the price inflation city workers and clerical workers experienced (28 percent of the population).

    In 1978, the Bureau of Labor Statistics created a new CPI to cover all people living in cities, nearly nine in ten people in the country. It gave it a new name, CPI-U. But, Congress did not use this definition for Social Security cost-of-living adjustments. Congress uses it to calculate people’s individual income tax brackets and poverty levels.

    In 1988, the Bureau of Labor Statistics created yet another experimental CPI index to cover spending of people 62 and older. It named it the CPI-E. But, again, Congress did not use this definition for Social Security cost-of-living adjustments.

    Then, in 1999, the Bureau of Labor Statistics changed the way it measured inflation by assuming that when prices go up for a particular item people will buy a different similar item. For example, if the price of chicken goes up, people might buy pork instead. Through this change, the BLS measures for inflation reflect slower growth.  It’s called the CPI-W. As a result of this change, the CPI-W, the basis for Social Security cost-of-living adjustments from one year to the next, reports lower inflation than it otherwise would.

    In 1999, the Bureau of Labor Statistics also began looking at a “chained” measure, one that takes into consideration that, when prices rise, people might make tradeoffs not only between similar items but between different needs. For example, if rent goes up, people might spend less on travel. This chained measure, further slows the rate of growth of the CPI by .3 percentage points. It’s called the chained CPI-U.

    Republican leaders and others would like Congress to switch to this chained CPI-U for Social Security benefits, which would effectively reduce people’s monthly checks. And, it would further undermine the financial security of people receiving Social Security.

    Others, including Social Security Works, want to expand Social Security. They argue that we need a better CPI-E, with a sample size that fairly represents all older adults. This CPI-E would best reflect the cost of living for older adults. It would give greater weight to health care cost increases since older adults use three times more health care than the rest of the population. And, older adults represent more than 60 percent of the people receiving Social Security benefits.

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  • No increase in Social Security checks likely in 2017

    No increase in Social Security checks likely in 2017

    For the second year in a row, people receiving Social Security should expect to see little or no increase in their Social Security checks in 2017; the increase ensures people’s checks keep pace with inflation, preventing their benefits from eroding. Any change to the amount of Social Security benefits people receive is based on the consumer price index.

    The latest Social Security Trustees’ report forecasts a cost of living adjustment of 0.2 percent for next year or $2.60 on the average monthly benefit of slightly more than $1,300.

    As it is, Congress should be expanding the Social Security benefit. $1,300 a month is not enough to meet many people’s retirement needs. It only replaces about 40 percent of a typical retirees’ pre-retirement income. Today, Social Security represents more than half the income of two-thirds of people 65 and older. More than half of all households in the U.S. have no retirement savings.

    In 2016, there was no cost of living increase, so no increase in Social Security benefits. But, health care and prescription drug costs for older adults and people with disabilities are mounting, and they make up a far larger proportion of spending for people receiving Social Security benefits than are reflected in the basket of goods that are looked at to determine the cost of living adjustment. As a result, older adults effectively have seen a cut in their Social Security income.

    Congress should be looking at a new way to calculate the cost of living adjustment (COLA) for Social Security benefits, a way that accurately reflects the increase in costs older adults and people with disabilities face. Instead of calculating the COLA and Social Security benefit increase based on cost increases for the basket of goods that wage earners are purchasing, the benefit increase should be calculated based on cost increases for the basket of goods that retirees are purchasing. Older adults spend about three times more than working people on health care products and medical care.

    Relative to other developed countries, the United States provides some of the lowest benefits.

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