Senior citizens should enjoy a cost-of-living adjustment (COLA) from the Social Security Administration in January, according to Massachusetts nonprofit group American Institute for Economic Research (AIER). This will be the first time in two years that benefits recipients will get a COLA, which is designed to ensure that the agency’s benefits account for inflation.
The Christian Science Monitor reports that prior to this two-year impasse on COLA, the rate had increased for beneficiaries every year since 1975. The Great Recession, however, lowered consumer prices so that COLA couldn’t increase.
“It’s important to remember that the typical older American today lives on an income of roughly $20,000, and Social Security keeps nearly a third of older Americans out of poverty,” said Tiffany Lundquist, spokeswoman for the AARP. “After two years with no COLA and increasing costs for food, utilities and health care, every dollar of the modest average benefit of $14,000 is critical.”
AIER estimates that the COLA will be somewhere between 3.5 and 3.7 percent. The exact adjustment is expected to be announced on Wednesday or soon thereafter when the U.S. Bureau of Labor Statistics issues its Consumer Price Index for Urban Wage Earners and Clerical Workers for September 2011.
“The COLA index is based on average price of goods and services as consumed by workers, not by retired people,” AUER research fellow Polina Vlasenko told The Christian Science Monitor. “Retirees tend to spend more on health-care and goods and services, and those prices increase faster than the national average. So COLA may not fully compensate for what that they spend their money on. The index isn’t ideal for retired persons, but it is what it is.”
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