Many readers are misinformed about the Social Security COLA calculation. Some believe it is manipulated by Congress or even the President. Others think it does not reflect true inflation affecting Seniors. The fact is the COLA calculation is fixed by law. Following is a good explanation from one of the commenters on Quinnscommentary.
The CPI-W is a running index, meaning each months CPI-W is calculated starting with the previous months index. So each months index is a reflection of all the previous months combined. They use the average of July, August, September to minimize the chance of a single month spike negatively or positively effecting the calculation. And they use those three months rather than October, November, December to give them time to implement the adjustment.
I have also noticed that many seniors feel a good COLA is their right, they paid for it, it’s something they deserve. Why❓Current seniors, me included, have not paid for our COLAs. That’s up to our children and grandchildren and it will be a growing burden on them. Except for government pensions, a COLA on private employer pensions is rare. We seniors had a lifetime to prepare for old age, we knew what was coming, we lived our lives. Whether you earned $30,000 a year or $300,000, your retirement income will reflect your lifetime living standard and your life choices.
I guess the real question is do today’s seniors have a right to more income transferred from today’s middle-class workers? Do they?
QUINNSCOMMENTARY 
Note to Jack B: The art of successful persuasion rarely includes insults. Letting off steam feels good, but if the point is to explain and elucidate, it fails to help.
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The Social Security “COLA” is simply another name for an adjustment that eliminates the effects of inflation. It assures that a retiree can buy the same basket of groceries at age 85 that he bought at age 65. It may be good for the economy when the government (yes, the Fed is part of the government) strives to achieve 2% annual inflation, but that makes today’s dollar worth about 65 cents in 20 years time, and that is not good for fixed income retirees. Particularly when the same government has pushed interest on savings to near 0.
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Dick… It might be time to give up on SS COLA posts. As often as you try to explain the structure of social security, the buffoons who won’t take the time to understand it or are incapable of such fill the replies with nonsense. You might have better luck explaining quantum mechanics to a troop of monkeys.
For those who would like to understand social security….read this http://econlib.org/library/Enc/SocialSecurity.html
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Ahhh…Jack B…the man who is an expert, or so it would appear, on SS COLA and detection of buffoons, nonsense, explanations of quantum mechanics to primates and the like. He now wishes to tell Dick what to put in his column because Jack, it would appear, doesn’t like the replies Dick not he (Jack) is getting. So he calls all those who disagree with Dick names and casts aspersions on their intelligence, etc.
Oh to be gifted with Jack B’s knowledge an abilities in the above fields…. tis a consummation devotedly to be wished.
I WAS on this columns mailing list but it would appear that if you don’t toe and agree wit the party line and Dick you’re insulted and not wanted. Bye Bye
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Provocative question Dick. And a good one. The structure of SS is not sustainable. All sides of the debate admit this. The solutions are many. It is similar to rehabilitating a building for an earthquake. The current structure is no longer up to the task, so new beams are required. The SS problem is very solvable. We need politicians on both sides with courage and foresight.
COLA reform may be a part of the restructuring. And means testing seems to me to be a fair solution, even with admin costs increasing as a result. The longer the politicians dither, the more painful the ultimate fix will have to be. Right now fixes are possible that are significant but not radical. If we wait another ten or fifteen years that will not be the case.
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You are right and taking relatively modest steps now is exactly what the Trustees have been urging for years, but have been ignored.
However, as you can see from the other comments here many people believe they have paid for a COLA, deserve more and the heck with everyone else.
The reality is that incoming taxes to Social Security are not sufficient to pay current beneficiaries let alone the benefits for the people who are actually paying taxes today into SS.
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Don’t like the COLA eh? Too bad!!! My social security contribution percentage didn’t stay the same throughout my working life. It always increased (like the COLA) either in the amount of wages subject to the social security tax or the percentage taken out. I fully paid for the COLA through these increases over the 50+ years I worked.
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Cola will be peanuts! You will be lucky if it buys a few cups of Dunkin coffee!
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John:
You’re right on in your evaluation of the amount of COLA but it seems to bother Quinn that we would get even “peanuts”. After all we put in a lot through the increases over the years and it seems that there are those who would begrudge us even a few “peanuts” each year.
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No you didn’t, you paid only the benefits for people who were collecting while you were working plus some extra to buy bonds for the Trust. The Trust is now using incoming taxes from people still working plus interest on those bonds to pay your benefits. If you paid for all your benefits why will the Trust be depleted in about 16 years? And no, it’s not because the government used the money for other things.
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Exactly RD…The system was set up so I paid for their COLA and now the current workers can pay for my COLA and simple bonds, James Bond or any type of bond you choose. It’s a contract…and when I signed on to that contract that was the agreement. Sixteen years? I will probably be dead by then so they can sort it out without me. Meanwhile hands off my COLA. If you contracted to buy a Cadillac on layaway from a car dealer and when you got to the dealer to collect your Cadillac they said sorry no Cadillac but we’ll give you a Yugo instead because if we don’t we’ll be bankrupt in 16 months you don’t mean to tell me you would take the Yugo? You sound like someone who is in the reduced social security benefit “windfall” category and wouldn’t be eligible for the COLA anyway and pays more than the standard Medicare $104.90…am I right?
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Everyone receives the COLA regardless of income. That’s one of the problems. Perhaps anyone receiving the maximum SS benefit at retirement shouldn’t receive a regular COLA. keep in mind that when you were paying into SS there were many more workers per retiree. That is no longer the case and thus the burden on workers is greater so that’s another problem to deal with. Sadly, employers have been breaking retirement “promises” for a long time while claiming the benefits being accrued were part of compensation. Nothing is guaranteed especially when it becomes unaffordable. Not to worry though. No one is proposing cuts that would affect current beneficiaries.
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Yes, I believe we as seniors would like to see an increase, due to exceedingly higher costs of everything. True, we did not make as much money during our work place time, therefore, our SS benefit is lower than those that will soon retire and thereafter. Not due to our fault, but to what the workplace was paying at the time that we worked. Whereas the same job that we were paid a considerable less income for now pays considerably more money. In order for us, as seniors to keep up with the growing costs in our daily lives, food, insurances, co-pays for our doctors, purchases of autos, houses, repairs and help etc,we need an increase because our initial SS benefit was so much lower due to incomes. When I was at middle age, our cost of housing was much lower (below $30,000 as well as cars below $5,000 for a new car which went along with our incomes). I truly feel sorry for the young ones today trying to buy vehicles and houses however, their incomes off set the higher expense that they need to pay. I could buy groceries for under $60 for a family of 5 whereas today with 2 of us, I can’t get out of the grocery store for under $150. Our SS benefits reflect our income’s back then, so in order to keep up with society (without dying) we need additional help through our SS benefits to just keep up with the economy. In so saying, with salaries lower, so are our retirement benefits I am grateful for the help and increase every year because as we age we are not able to do some of the things we used to do, requiring hiring help to perform these duties (i.e. lawn care, plumbing, car repairs, etc) and many co-pays in our insurances for Doctor Specialists that we were not necessary in our younger age These expenses add to our costs of our SS benefits causing us to be very limited on what we can afford to do, (vacations, travel, going out for dinners, theaters etc) things we were able to do years ago however costs have increased so that our existence is limited in our activities with limited SS income.So without the help every year of a SS increase (COLA), it makes it harder and harder to make it in this day and age. The appreciation of our children’s and the government’s help through the SS COLA makes life a little easier when an increase is available in January every year to help defray rising costs and for us to be able to continue to live in the community. So, yes, I believe the COLA increase to help seniors keep up with rising costs and added expenses is necessary for us to continue to live in our society where we give back with our words of wisdom, that we have learned through the ages, our volunteering, and the thrill of us being able to see our grandchildren grow as well as trying to be independent and live our last years with dignity and respect .
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