Retirees might get a little bit more spending money from Social Security next year — maybe enough to buy a nice cup of coffee at Starbucks or a slimmed-down lunch at McDonalds.
With Friday’s report on U.S. inflation for August, a slim cost-of-living adjustment remains in the cards in 2017 for 66 million retirees and other beneficiaries. Based on preliminary figures, the cost-of-living adjustment next year could approximate 0.3 percent. On the typical retirement payment around $1,304 a month, the increase would equate to an additional $4 or so.
Still, that’s more than what has been available this year, when no cost-of-living adjustment was paid because of low inflation.
Here are answers to some questions for retirees who get monthly Social Security payments:
Q: Has Social Security announced whether there will be a COLA increase for the coming year?
A: Not yet. That decision won’t be made until after the Bureau of Labor Statistics on Oct. 18 releases the nation’s monthly inflation report for September. But with the July and August numbers in, a cost-of-living adjustment around 0.3 percent appears probable. Earlier in the year, Social Security’s trustees forecast a 0.2-percent increase for 2017.
Q: What’s the computation based on?
A: Social Security will pay a cost-of-living adjustment next year if consumer-price levels in the third quarter of 2016 — July through September — exceed consumer prices for the third quarter of 2014. Normally, it’s a year-over-year comparison. But since no cost-of-living adjustment was paid for 2016, the comparison will be made against the preceding year — the July-September stretch of 2014.
As noted, inflation for September 2016 still hasn’t been reported. But it would be a surprise if the September figure varies much from the low inflation readings for July and August.
Q: Does Social Security use the usual inflation figures when determining COLA increases?
A: No. By law, Social Security bases any cost-of-living adjustments on changes in CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers. The more commonly cited inflation measure is CPI-U, or the Consumer Price Index for all Urban Consumers.
Q: Does it make much of a difference?
A: It could, though inflation has been low in recent years — regardless of which measure you track. For example, CPI-U rose a modest 1.1 percent over the 12 months through August.
Q: Social Security didn’t pay a COLA for 2016 and still might not pay one for 2017. Would that be unprecedented — two straight years with no increases?
A: No, it has happened. Social Security didn’t pay cost-of-living adjustments in 2010 or 2011. Benefits then rose 3.6 percent in 2012, 1.7 percent in 2013, 1.5 percent in 2014 and 1.7 percent in 2015, before dropping to zero last year.
