2014 Social Security COLA

Social Security Exhibit

The government shutdown in the first half of October delayed the CPI release by two weeks. Inflation was very low in the last 12 months. According to the government, the Consumer Price Index for Urban Consumers (CPI-U) in September 2013 was 1.2% higher than the same measure a year ago in September 2012.

The annual Social Security cost of living adjustments (COLA) uses a different CPI series, the CPI-W, but it’s a similar situation there. CPI-W in September 2013 was 1.0% higher than CPI-W in September 2012.

This number made it possible to calculate the 2014 Social Security COLA. It will be 1.5%. It’s slightly lower than the 1.7% number for 2013.

Should retirees want a higher Social Security COLA or a lower Social Security COLA?

Naturally people want a higher COLA. There were a ton of complaints when there were 0% COLA a few years back. But the COLA is going to be higher only when inflation is higher.

Some mistakenly thought the Social Security COLA is declared administratively by the President or Congress, and they want their elected officials to take care of the seniors by declaring a higher COLA. That’s not the case. The calculation is automatic. It goes strictly by inflation. A higher COLA with a higher inflation does you no good.

Contrary to intuition and many people’s belief, you want a lower COLA. A lower COLA means lower inflation, which means lower expenses for retirees, which makes your savings last longer.

Pray for a lower COLA if you are retired.

[Update on Oct. 31, 2013]: The Social Security Administration issued press release, which confirmed the 1.5% number I projected in August.

[Photo credit: Flickr user FDR Presidential Library & Museum]

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  1. ERIC TARINI says

    Love your blog!

    Yes, people complained when they had back-to-back zero COLAs, but they sure didn’t mind when gas prices spiked in just the right quarter and they got 5.8% in 2008, and then gas prices and inflation retreated (which was what eliminated the COLAs the next two years). That was the highest COLA since 7.4% in 1982. In essence, they got an advance on future inflation.

    BTW, the 2013 COLA was 1.7%. I think we’ll be lucky to see 1.5% for the next COLA.

    • Joe Blow says

      Eric Tarini, you sound like a pompous asshole who probably makes far more money than you’re worth. The 5.8% increase in 2003 was NOT an “advance against future inflation.” It didn’t even make up for the amounts beneficiaries have been robbed of in years past, let alone do anything to protect them in the future.

      You had better take your stingy, greedy blinders off and take a look at the real world. Implying that beneficiaries are already making too much tells me that you’re a selfish douche bag.

  2. ec on says

    The Big Lie. The regime is artficially under-reporting changes in the cost of living by a phony “CPI.” Designed to under-report price hikes, especially for retiree age groups. Not-Secret Examples: price of something goes up, they adjust the proportion of that thing in the CPI downwards. Medical insurance is less than 1% of the amount “spent.” The less the COLA (sic) the better to allow deficit spending on things that really matter such as payoffs to illegals, foreigners, farmers, and other preferred groups.

    • SirGareth says

      Lets see, medicare part B premium is project to go up by 20.0% due to inflation but social security cola will go up by 1.5%

      Someone is smoking wacky weed

    • pat says

      Thank you for seeing what the blind don’t. A couple of yrs ago the big o released how many barrals of oil just in time for it hit the cpi. Yes we had two yrs of zero increase, and never in the 75 yrs before that did that happen. These wonderful baffon running this country really NO how to run the country (in the ground). Keep blindly follow them like a fool and when you collect ss it will be gone.

  3. John Q Reagan says

    I suspect Ed Tarini is mistaken. An 8% bump over a couple of years doesn’t compensate for real inflation. For example, I just received a dose of sticker shock when I went to buy bread for my son…When did a loaf of crappy white bread hit $2.50? Milk at $4.00 a gallon? A nectarine ‘on sale’ is $1.99? Meanwhile, gas plays tag with $4.00 and medicines are generally up. Not to mention the double digit increases in medical insurance over the last 8 years. The measly 2% COLA adjustment doesn’t even begin to cover real costs.

    And I do agree with EC. Maybe if Congress and our over bloated Defense Industry ( $1.08 Trillion per year) had to get by on the same COLA increases those that worked and paid their taxes all their life wouldn’t be treated so stingily.

  4. Matthew Winkler says

    Any idea on what the adjustments (if any) will be to IRA and 401k maximum contributions for 2014? They both went up last year (though over 50 contributions didn’t, but I don’t have to worry about them yet).

  5. Harry says

    Matthew – There will be none. The total (employer + employee) contributions to all defined contribution plans by the same employer may go up from $51k to $52k, but most people are nowhere close to that maximum except self-employed or business owners. Other than that, all 401k and IRA limits for 2014 will stay the same.

  6. Mary Lamb says

    Mr. Tarini forgets that cola adjustments are designed to compensate for future expenses based on what already took place – meaning retirees already LOST money due to higher prices during the previous year… and will lose even more as of any given October announcement as prices continue to rise – 3 months BEFORE we even see the increase. Our 2014 SS benefit should not reflect the cost of goods until September 2013, it should reflect the estimated cost of goods going forward through December of 2014. Yes, we got a nice bump in 2008 – after we were already robbed blind in 2007 – and then had to “pay it back” with zero colas while everything increased in real life.

    BTW, my auto/home insurance policy alone ate up my ENTIRE cola for 2013 – but our government bean counters seem to think otherwise.

    • Joyce a says

      I would love to see all the political officials (as they think they are) live on what a person with disabilities or retired people live on for a year. Gee wouldn’t they straighten up the work “we the people” sent them to Washington to do on our behalf. They get there and go wild-can do wrong and can get their hand slapped and “don’t do that again or finally get kicked out and still have their 6 figure retirement and all the perks. Let them live on this big COLA and they will cry. Wake up Washington and help the people who sent you there. Stop Obamas pay and all the others for 4 years and let food, doctors, prescriptions, utilities, gas, no handouts, no trips to Hawaii oh don’t forget the extra plane for the dogs and lets watch us all be better off. Bet they remember why and who voted them to go to Washington.

  7. D.BUNDY says

    just remember . theres alot more money going in to washington now. with millions of jobs being filled in the past 5 years.. thats a lot more taxes paid in ….. but they fail to tell you that!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    • shelia says

      I too would like to see Congressman or any state or government office personal live on what my husband and I get a month. Less than $2400.00 a month we are both disable pay around $800.00 per month for meds, lots rent, trailer payment, power bill and phone and still have too pay a car payment auto ins. and buy food. We get $16.00 a month food stamps

    • Bruce says

      It sounds tough. How old are you? Do you have savings? I never had car payments myself because I never felt I could afford them. Luckily I saved about $1,600,000 by saving and investing since I was young. I still look forward to getting my SS check which I dearly paid for. I pay cash for the big items (house car etc) and can do very well on our combined SS income of about 3600/month. I really wish you well.

  8. pat says

    my electric bill has gone up from $30.00 a month in Dec 2007 to $134.64 in September of 2013. Medical insurance has gone from $152.16 a month in
    Dec 2007 to $310.0 a month in September. No Cola has already put me in the poor house. SSDI income doesn’t begin to cover all my expenses, somethings have to wait. I have to rob peter to pay paul. Another restaurant closed here this month, that makes 7 in the last 5 years, do not see an improving economy, going south in my estimation. I too, would like to see my congressmen could live a year on what I receive. Real double digit inflation exists! Government information is skewed, big time!

    • DWright says

      SSI was not created to be a complete retirement plan but a safety net to keep people out of destitude. Now a days, its a suppliment and the amount shouldn’t carry a lot weight in anyone’s retirement plan. If you have too many expenses, cut back. Financing a new care with SSI is a questionable decision IMO. bur you qualified so there must have neen enough room. Good Luck.

  9. Dr. Zabian Crosby, D.H.Ed. says

    We should also keep in mind that the COLA affects not only Social Security retirees, but includes those receiving SSDI/SSI as well as Veterans Compensation and Pension benefits. This is important because these groups often suffer from ancillary conditions as a result of disability that require additional expenses that may not be provided or reimbursed by the program. The end result is that these groups suffer even more when the increase does not accurately reflect the true cost of living under these circumstances.

  10. Jennifer Smith says

    Finance a new car on SSI?? Really? I receive SSI, approximately $866 (the MAXIMUM amount) in California. I’m mentally disabled. My rent for a pretty nice room is $550 a month (I LUCKED out) I have $316 left a month to *play* with. In other words, pay for food, (In CA SSI pays beneficiaries extra money in lieu of food stamps, approximate $120, not sure on $ amount). So, $316 for the whole month, month after month, year after year. For food, hygeine products, laundry soap, dish soap, toilet paper, no transportation costs here, I walk five miles each way to see my doctor rather than pay bus fare. Things wear out eventually and you have to buy a replacement ie clothes, shoes, kitchen appliances, telephones, underwear you know how annoying it is to not be able to afford underwear? Furniture, dishwares, I saved up for twelve months to get my ccomputer. I buy everything used, or find it free on craigslist or on a street curb. I know my post sounds like I’m complaining. I’m not. I’m annoyed and mad as heck that people do NOT understand that recipients of SSI barely make it each month, yet we’re looked down on as being leeches on *the system*. Or scammers. Who in their right mind would WANT to live on $866 a month FOREVER!! I hate it, and then being ostrasized for it is plain ignorant. Entertainment? Starbucks? A car? Not going to happen. Dental care? I WISH. Even a bus ride to the beach is too much money. SSI provides enough money for you to stress out and try to get by month by month, a neverending cycle. Food, or buy some shampoo and deodorant etc. It is better than being homeless. But SSI really needs to stop being touted as some blessing that people are just dying to live on because let me tell you something living on SSI is NOT LIVING. ANIMALS have better programs in this country than the elderly, disabled, and children. So do illegal immigrants. This country should be ashamed of itself for keeping people at a level far far below the Federal poverty level, hoping each October that maybe we’ll see more than $12 a month coming in the next year. By the way, I AM truly disabled, I received what’s called “Presumptive Disability” the first time my county psychiatrist’s office’s worker helped me fill out the paperwork. So the first try, and I received it before the official ok since I was presumed to be disaabled. I’m soooo looking forward to the holidays and knowing that my life is over I have no life and knowing and listening to educated political people online saying people on Social Security, and SSI should cut back on their expenses lol!!! Pisha : \ I doubt this will be put up, go ahead and live in your dreamland people.

  11. Clinton Nauert says

    Look everything works the same way — If Social Security went up 300% for 2014 COLA all products that one buys would go up 305%. If minimum wage goes up 1.00 per hour or .20 cents per hour the next week all products go up 1% or 5% or 10% or what ever it takes to get all the money you makes plus .10 cents. The United States is coming to the end of its run …. if we had different people running the government perhaps we could have gone 20 years longer and then again we might have imploded 20 years sooner. We read in history how Great Nations came and went and so will we. Take care of yourself, help your family and friends and enjoy today. You can change tomorrow a tiny bit but not enough to matter. It is called life and it is not always someone else’s fault.

  12. Richard Townsend says

    Cost of living raises are a necessity for financial and emotional well-being! Most all beneficiaries are living around the poverty level. If you want to balance the income and living standards, then reduce corporate and government salaries. Reduce corporate profits and deflate goods and services costs. You won’t need a high COLA, because you would be able to pay successfully. Now you know that this isn’t going to happen, but it needs to.

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