Expect a Low Social Social Security Raise

 

consumer

 

 

The Lowest COLA Increase Since 1975

 

Associated Press (AP) reports that the Cost-Of-Living (COLA) increase for this year will be about 1.5%. The amount of this increase is the same as last year and about the lowest automatic increase since 1975. The exact amount of next year’s increase will not be known until the U.S. Department of Labor releases their inflation report. In general, next year’s raise is small because consumer prices, as measured by the government, have not increased very much.   According to AP the average monthly Social Security benefit is $1,162. A 1.5 percent increase will be about $17.

People who retire early are especially hit by the small raise. Early retirees permanently receive a reduced benefit.  The decreased benefit affects the amount of the annual Cost-Of-Living Adjustment (COLA) increase.  For example, if the COLA is 1.5 percent and the monthly benefit is $1,000, the amount of the COLA increase is $1,000 X .015 = $15. In contrast, someone with a $750 benefit would  receive $22.50 ($750 X .015 = $11.25). The increased monthly payment amount becomes the new basis for the next COLA increase.

Note: In the past the COLA was often 3 percent or $30 a month increase for someone  with a $1,000 benefit.

Claimants receive annual Cost-Of-Living increases based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. COLAs ensure that benefits keep up with inflation. For more information see www.ssa.gov/OACT/STATS/cpiw.html.

 

About ksindell

Kathleen Sindell, Ph.D. is the author of numerous academic, popular, and professional finance articles, Web sites, proposals, and books. This includes the bestselling reference book, "Investing Online for Dummies, Eds 1-5" (listed for two consecutive years on the Wall Street Journal's Bestselling Business Book List). Her most recent book "Social Security: Maximize your Benefits" has been listed in Amazon's Top 100 Bestselling Retirement Planning Books. It is important to note that "Social Security: Maximize Your Benefits, 2nd Edition" was just released. Sindell has an in-depth understanding of the financial services industry and has held Series 7, 63, and 65 licenses. Dr. Sindell is regularly tapped as a financial services expert on ABC World News, The Nightly Business Report, and at popular online and print outlets. Kathleen Sindell, Ph.D. is a member of the Board of Directors for the Financial Planning Association, National Capital Area (FPA NCA), is on the Editorial Advisory Panel of the Journal of Financial Planning, and is Co-Chair of the Metro Washington Financial Planning Day. Sindell is a Course Chair II, CFP Program Academic Officer, and adjunct full-professor at the University of Maryland, UMUC, School of Undergraduate Studies. Contact Information: ksindell@kathleensindell.com or 703-299-1700
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