[Updated with 2015 Forecast - 90% accurate] What will the 2015 SSI COLA increase be? That’s the question 60 million social security recipients (mainly federal and military retirees) will be asking later this year when the Social Security Administration (SSA) has officially announces the COLA increase. Per the update below the 2014 COLA raise was 1.5%, but it looks like this year the increase will be the same or higher.
The COLA increase is based on the percentage increase (if any) in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year over the average for the third quarter of the previous year in which a COLA became effective. The government, via the BLS, publishes the official annual cost-of-living adjustments typically in late October, with changes to social security, retiree benefits and medicare effective for the subsequent year.
Based on the government’s most recent inflation data, CPI (inflation) is trending relatively similar to last year and the consensus range for the 2015 SSI COLA increase is 1.5% to 1.7% from the eight to ten sites that also write extensively on this topic. But with the recent release of the second (of three) CPI monthly numbers required for the COLA calculation it is almost certain that the 2015 COLA increase will be towards the higher end of the range (1.7%). This would reflect a 0.2% increase over 2014.
I will provide the final 2015 SSI increase once the official figures are published and encourage you to subscribe to this blog (see top right for options) to get the latest news.
[2014 COLA Increase of 1.5% and Social Security Taxable Maximum Increase Provides Little Relief] In line with the CBO estimate provided below, the Social Security Administration (SSA) has officially announced a 1.5% cost-of-living adjustment (COLA) increase for 2014 based on final September inflation figures. The maximum amount of 2014 earnings (taxable maximum) subject to the Social Security tax will be $117,000, up from $113,700 in 2013. The SSA estimates that of 165 million workers who will pay Social Security taxes in 2014, about 10 million workers will pay higher taxes as a result of the increase in the taxable maximum.
Over 60 million social security recipients will be impacted by this change when in takes effect in January 2014. For the average retired worker the 1.5% raise equals about $19 more per month for a total monthly average income of $1,272. The COLA figure will also impact 2014 Medicare limits and adjustments to 2014 401K and IRA contribution limits.
[September 2013] The Congressional Budget Office has forecast a 1.5% COLA raise in 2014 based on preliminary CPI-W data. This is 0.2% less than the 2013 increase and is below 2014 inflation forecasts. The Social Security administration has to officially confirm this figure (around mid-october), but if accurate Social Security and Supplemental Security Income (SSI) benefits for over 60 million Americans will increase by 1.5 percent in 2014. The 2014 increase is significantly below the 2013 increase of 1.7% and 2012 COLA increase of 3.6%, reflecting a persistent low inflation and interest rate environment. The 1.5% increase will be seen in January 2014 payments. For the average retiree this is equivalent to an extra $19 a month.
Retiree pay increases for military and federal civilian workers is also linked to the COLA adjustment and is automatically adjusted on an annual basis. Federal retirees, whether they are covered by the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS), will receive the full COLA adjustment. According to the government formula, if the full COLA increase is 3 percent or higher, as it was for 2012, FERS retirees receive 1 percent less than the full increase. So FERS retirees received 2.6 percent for 2012. If the COLA falls between 2 percent and 3 percent, then FERS retirees would receive 2 percent. If the increase is less than 2 percent, as it is in 2013, FERS retirees receive the same as CSRS retirees. In other words, 1.7 percent.
However, adjustments in veterans’ benefits covering disability and survivor are not automatic, and must be approved by Congress and signed into law by the president.