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Government Shutdown Delays Cost of Living Adjustment for Social Security

On Behalf of | Oct 18, 2013 | Blog, social security disability

Another year of very small cost of living adjustments (COLAs) for social security recipients appears to be on the horizon. No one will know the exact figure until the Labor Department releases its September inflation report, which was delayed considerably because of the government shutdown. More than 20% of Americans will be affected by the news.

The COLA was initially adopted in 1973 so that those on fixed incomes wouldn’t get buried by inflation. Typically, the adjustment is released in October so that government programs have enough time to adjust their benefits accordingly.

COLAs are calculated off of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) by the Bureau of Labor Statistics. The CPI-W measures the changing price levels of consumer goods and services (food, housing, transportation, medical care, etc.). The Bureau of Labor Statistics then compares the average CPI-W from July-September from the current year to the previous year. The percentage increase between the two is used to determine the COLA for the upcoming year.

Based on the numbers from July and August, economists are estimating a small increase of 1.5%. To put that into perspective, the average Social Security raise since 1975 has been 4.1%.