Federal retirees to receive 1.7 percent cost-of-living adjustment in 2015

This is the third year in a row that cost-of-living adjustments for federal retirees, Social Security recipients and disabled veterans will be less than 2 perce...

Federal retirees, disabled veterans and Social Security recipients will see a cost-of-living adjustment of 1.7 percent in 2015.

It’s the third year in a row the increase will be less than 2 percent.

The 1.7 percent increase will result in an average bump of $22 for retired workers, going from an average of $1,306 per month to $1,328, according to the Social Security Administration.

By law, the cost-of-living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.

The COLA is calculated by comparing consumer prices in July, August and September each year with prices in the same three months from the previous year. If prices go up over the course of the year, benefits go up, starting with payments delivered in January.

“Despite the partial relief this 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,” said NARFE President Joseph Beaudoin in a press release. “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. We need a cost-of-living formula that doesn’t force these Americans to take one step forward, then two steps back.”

Beaudoin is calling for cost-of-living adjustments to be calculated using the CPI-E formula, which he calls “a more accurate measure of inflation that accounts for health care and other costs facing seniors.”

The COLA affects benefits for about 59 million Social Security recipients, 2.5 million federal retirees and their survivors, 4 million disabled veterans and more than 8 million people who get Supplemental Security Income, the disability program for the poor. That’s more than a fifth of the country.

Congress enacted automatic increases for Social Security beneficiaries in 1975, when inflation was high and there was a lot of pressure to regularly raise benefits.

For the first 35 years, the COLA was less than 2 percent only three times. Next year, the COLA will be less than 2 percent for the fifth time in six years. This year’s increase was 1.5 percent, the year before it was 1.7 percent.

“At least the modest 1.7 percent increase for retirees is better than the paltry 1 percent wage increase current federal employees will receive next year,” said J. David Cox Sr., national president of the American Federation of Government Employees, in a release. “Federal employees are just now coming out of an unprecedented three-year pay freeze and are seeing their wages cut as they are forced to pay more into a retirement system that is fully funded.

“While any increase is better than no increase, the fact of the matter is that for millions of seniors, retirees and federal employees, these annual increases will be gone before most even receive them.”

The Associated Press contributed to this story.

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