Federal and military retirees and Social Security beneficiaries will receive a 1.7 percent cost-of-living adjustment in 2015.
The COLA is based on the year-to-year change in the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, for the third quarter of the year. The CPI was announced Oct. 22 by the Bureau of Labor Statistics.
Beginning in January, the estimated average monthly Social Security benefits paid to all retired workers will increase from $1,306 to $1,328, the Social Security Administration said. For an aged couple who both receive benefits, average benefits will go from $2,140 to $2,176.
SSA said the COLA will begin for more than 58 million Social Security beneficiaries in January 2015, while more than 8 million SSI beneficiaries will receive the increases beginning on Dec. 31, 2014. The COLA also will apply to veterans’ disability compensation.
The maximum amount of earnings subject to the Social Security tax will increase to $118,500 from $117,000, SSA said, increasing taxes for about 10 million Americans.
“News of the cost-of-living adjustment (COLA) for the coming year always is eagerly awaited by the countless Americans who rely on the increase to keep up with the rising price of food, housing, transportation and medical care,” said Joseph Beaudoin, president of the National Active and Retired Federal Employees Association. “However, despite the partial relief this 1.7 percent COLA will provide, the announcement is a reminder that our method for calculating the increasing cost of goods and services is out of sync with the reality faced by millions of federal annuitants, Social Security recipients and military retirees, who spend more than twice as much on medical care than the population measured by the current CPI-W formula.”
“The average 3.8 percent increase in health care premiums for federal employees and retirees in 2015 shows that medical costs continue to outpace the COLA as it is calculated presently,” he said. “We need a cost-of-living formula that doesn’t force these Americans to take one step forward, then two steps back.”
Beaudoin advocates a move to the Experimental Consumer Price Index for Older Americans (CPI-E), which indicates a slightly higher inflation rate for older Americans, and which accounts for health care and other costs. Beaudoin warns Congress away from proposals to switch to the so-called Chained CPI, which would result in a decrease in benefits over the long term.