Gas Prices Eliminate Social Security Increase
Individuals receiving social security, disabled veterans and retired federal employees will not see an increase in their benefits during the next fiscal year. Over 20 percent of Americans are impacted by this news. This is only the third time in 40 years that this federal benefit has failed to see an increase.
- Also Read: 3 Reasons Certain Federal Employees Can Retire Years Earlier Than Their Peers Without Penalties
- Also Read: CSRS Retirement in 2024: Are You Making the Most of What This Classic Plan Has to Offer?
- Also Read: Roth IRA Basics for Beginners: What’s There to Learn?
Lack of Adjustment to Cost of Living
On Thursday, the government will officially announce the lack of adjustment for cost of living at the same time they announce Consumer Price index details for the month. While the government has yet to make the announcement official, financial experts say that inflation rates have been very low this year and they do not expect that September’s numbers will do enough to necessitate a benefit increase.
According to inflation measures, overall prices have actually gone down since last year. Economist Polina Vlasenko told NBC News that, “Other prices – other than energy would have to jump. It would have to be a very sizable increase that would be visible and I don’t think that’s happened.”
Inflation measures were down 0.3 percent year over the last year (ending in August). This decline is attributed to a 23 percent drop in gas prices nationwide. Economists attribute the lower gas prices to smaller demand for oil. Many economies in Europe and Asia are at a standstill or barely growing. Additionally, gasoline prices have dropped because the increase in U.S. oil production has resulted in a surplus of oil. Add in potential access to Iranian oil and gas prices dropped even further.
Since 1975—Two Years Without an Increase
Since 1975, when Congress introduced automatic increases for social security there have only been two years where no increase occurred. Both of those years were in the last five years: 2010 and 2011. Typically, federal benefit increases hover around 4 percent. Following 2011, increases have been between 1.7 and 2 percent, nearly half of the average increase.
While the idea of lower prices may sound appealing to most Americans, the increase, or lack thereof, does not consider the spending habits of recipients. While older Americans on Social Security benefits may not benefit from the lower gas prices, they will not get an increase to help cover the cost of medical care because of the lower gas prices.
One study showed that despite increases since 2000, most seniors receiving the federal benefits have lost about 22 percent buying power. Last year the average benefit increased by just over $20 per month.
Many federal retirees will likely see a major increase in Medicare costs. No cost of living adjustment for social security means that individuals with Medicare benefits “held harmless” cannot be charged regular price increases. This leaves everyone else on the plan footing the bill. Estimates place the increases around $55 per month (of 50 percent) for beneficiaries that do not qualify for the “held harmless” exemption.
