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Social Security May Rise 3.49% if Inflation Holds Steady

By    |   Thursday, 15 Sep 2011 09:48 AM

Social Security recipients haven’t gotten a raise since January 2009. That could change this year and the monthly increase would be 3.49 percent if inflation is unchanged in September, about $41 a month for the average beneficiary.

Cost of Living Adjustments (COLA) are based on the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the months of July, August, and September.

The August CPI report from the Bureau of Labor Statistics provided two of the three required data points, and it looks like senior citizens will get a small raise.

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(Getty Images photo)
Average CPI-W needs to be higher than the average was in the third quarter of 2008 in order for COLA to increase Social Security payments. Prices spiked that summer on higher oil prices and when the bubble in crude oil collapsed, so did the CPI.

Even without official inflation, the data shows that a dollar doesn’t go as far as it did in 2009. The Bureau of Labor Statistics reports that the purchasing power of a consumer dollar has fallen by 7.61 percent since the last time retirees got a raise.

If inflation is unchanged in September, the small COLA in January 2011 will make up for less than half of the lost purchasing power. It will probably make up for even less of the loss when Medicare Part B premiums go up modestly, as most analysts expect.

The final COLA number won’t be set until September’s CPI is reported, and it could change from this preliminary estimate.

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Social Security recipients haven t gotten a raise since January 2009. That could change this year and the monthly increase would be 3.49 percent if inflation is unchanged in September, about $41 a month for the average beneficiary. Cost of Living Adjustments (COLA) are...
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