Since 1975, automatic adjustments have been made to Social Security disability benefits to account for inflation. According to a government report, more than 56 million Americans who now receive benefits will get a raise averaging around $19 per month, starting in January. To calculate the increase, the government considers the “cost-of-living adjustment” or COLA. Prior to 1975 and the application of COLA, an act of Congress was required to increase Social Security payments.
Taking into consideration the cost-of-living and the potential increase related to inflation is critical to ensuring that Americans who depend on Social Security benefits are financially secure. For most recipients, the subsidies must account for increased costs of food, utilities, health care and other basic needs. To calculate the COLA, the SSA compares the average price index for July, August and September with the index for the same three months in the previous year.
Social Security benefits payments average $1,131 per month or $13,572 per year. On average, payments to retired workers are higher, averaging around $1,237 per month. Disabled workers collect less on average, about $1,111 a month. The program also provides benefits to spouses, widows, widowers and their children.
The increase is the smallest hikes since the automatic adjustments began in 1975. In 2012, recipients received a 3.6 percent increase, but did not receive an increase the previous 2 years. The small increase suggests that inflation has been lower over the past year than it has been in the past; however, experts believe that the cost of living will continue to outpace inflation adjustments.
Source: Associated Press, “Social Security benefits to go up by 1.7 percent,” Stephen Ohlemacher, Oct. 16, 2012