By Rebecca Shabad - 10/30/13 10:12 AM EDT
Social Security benefits for nearly 57 million Americans will increase by 1.5 percent next year, the Bureau of Labor Statistics announced Wednesday.
The increase is one of the smallest the government has made since the mid-1970s. Stagnant consumer prices prevented the cost-of-living adjustment (COLA) from being raised more.
COLA is increased annually based on the Consumer Price Index to ensure that Social Security and Supplemental Security Income (SSI) benefits aren’t eroded by inflation. Americans who receive SSI will also receive higher payments beginning Dec. 31. SSI is the disability program for the poor.
In addition to those who receive Social Security, the COLA increase will also apply to disabled veterans and federal retirees.
The government was expected to issue the new COLA two weeks ago, but it was delayed because the 16-day shutdown forced the government to first release a delayed jobs report.
Since 1975, Social Security increases have averaged about 4 percent. The latest increase will mark the seventh time the COLA hike has been less than 2 percent.
COLA increased by 1.7 percent this year. In 2010 and 2011, COLA wasn’t issued because inflation was too low.
President Obama included a proposal to change the formula for determining COLA changes in his budget. The alternative formula, known as chained CPI, would result in a lower COLA adjustment.
Groups advocating for the seniors and poor, along with Democratic lawmakers, have expressed opposition to the change.
“We know that any adjustments Washington makes to Social Security will have a profound effect on individuals of all ages, businesses and our economy as a whole,” said AARP Executive Vice President Nancy LeaMond.
“That’s why AARP is fighting the chained CPI and calling for a national conversation about the future of Social Security — so those who paid into the system can have a voice in the debate and so current and future generations get the benefits they’ve earned.”
Max Richtman, president of the National Committee to Preserve Social Security and Medicare is also wary of chained CPI. He argues the 1.5 percent increase is “anything but too generous.”
“The American people don’t support cutting Social Security to balance the budget, and this annual COLA announcement should remind Washington why adopting the chained CPI is not only bad policy, it’s also bad politics."
— This story was updated at 11:21 a.m.