Social Security payments are expected to rise by at least 1.5 percent – a much smaller hike than last year. Learn more about the 2013 COLA.
Social Security checks should be a little bigger in January, according to the American Institute for Economic Research or AIER, which anticipates a cost-of-living adjustment between 1.5 percent and 1.7 percent next year.
A 1.5 percent COLA would be roughly 2 percent lower than last year’s hike of 3.6 percent, and is probably not large enough to fully offset the effects of inflation, according to the AEIR, a Greater Barrington, Mass. Economic think tank.
The COLA reflects the Consumer Price Index for Urban Wage and Clerical Workers, also known as the CPI-W, according to the institute. The Social Security Administration determines the COLA by comparing the CPI-W for the third quarter of the current year to the third quarter of the previous year. The data is scheduled to be released by the Bureau of Labor Statistics on October 16.
According to the AIER’s Everyday Price Index, a measure of necessary month-to-month expenses that seniors face, prices of frequently purchased goods and services rose by 2 percent in August of 2012, compared to August of last year. The EPI tracked a 2 percent increase in food and beverages, a 1.9 percent hike in gas and a 4.1 percent jump in the cost of medical care. The institute’s proprietary EPI is designed to reflect the rising cost of everyday goods consumer by senior citizens by excluding infrequently purchased large-ticket items and payments that are contractually fixed.
An increase in Medicare Part B premiums could also reduce the purchasing power of some seniors, according to the AIER.
A small COLA and hike in health insurance costs could add to the retirement worries of seniors worried about having enough money set aside for retirement. According to Millionaire Corner research, more than half of senior citizens with a net worth of $100,000 up to $1 million, not including primary residence, are concerned about retirement security.