For the first time since 2009, the U.S. government said Wednesday that it will raise Social Security benefits with a cost-of-living adjustment, up 3.6%, and the announcement was immediately followed by praise—and criticism.
Senate Finance Committee Chairman Max Baucus, D-Mont., who noted that the increase will grow the average benefit by $516 to $14,748 each year, said the COLA increase “is welcome news for seniors facing high prices for everyday items like gas, food and medicine.”
But others, including the AARP and the Insured Retirement Institute, pointed out that after two years of not receiving a cost-of-living adjustment in their Social Security checks, a majority of retirees will not see the full 3.6% increase in their 2012 checks. This is because an expected increase in Medicare Part B premiums will be deducted from recipients’ Social Security payments.
“This will affect the approximately 75% of Social Security recipients who were exempted from Part B premium increases in 2010 and 2011 when there was no COLA,” warned the IRI in a news release.
“Unfortunately, the increase announced today will not completely ease [retirees’] burden,” said AARP Executive Vice President Nancy LeaMond in a statement on Wednesday. “Medicare premiums are also expected to rise for many. And with the decline in housing values, deep losses to retirement and savings accounts and skyrocketing health and prescription drug costs, millions of older Americans continue to struggle to make ends meet.”
The announcement of the COLA increase comes as congressional members of the bipartisan Joint Select Committee on Deficit Reduction look for ways to slow Social Security’s growth. Meanwhile, the annual rate of inflation, also reported on Wednesday by the U.S. Bureau of Labor Statistics, stands at 2%, not including the volatile food and energy components.
“Ironically,” said LeaMond, “some in Washington are calling for permanently reducing Social Security checks for today’s seniors and future retirees. As part of a deficit reduction deal, many are calling on the ‘super committee’ to consider a new way to calculate the COLA, which would cut Social Security benefits by $112 billion over 10 years. This so-called ‘chained consumer price index,’ through compounding, would cut seniors’ benefits by thousands of dollars over their lifetimes–and the older one gets, the larger the cut.”