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Fed retirees to see 1.7 percent COLA increase in 2013
Tuesday - 10/16/2012, 12:48pm EDT
Social Security recipients received a 3.6 percent increase in benefits this year after getting none the previous two years. Meanwhile, the increase is more than the Congressional Budget Office's estimate earlier this year of 1.38 percent.
The increase means more than 56 million Social Security recipients will see their monthly payments go up by 1.7 percent next year. Social Security also provides benefits to millions of disabled workers, spouses, widows, widowers and children. The COLA announcement affects about 1 in 5 U.S. residents.
The increase will be the same for federal retirees under the current Federal Employees Retirement Systems (FERS) as well as the legacy Civil Service Retirement Systems (CSRS).
Social Security payments for retired workers average $1,237 a month, or about $14,800 a year. A 1.7 percent increase will amount to about $21 a month, or $252 a year, on average.
The increase, which starts in January, is tied to a measure of inflation released Tuesday. Inflation has been relatively low over the past year, despite the recent surge in gas prices, resulting in one of the smallest increases in Social Security payments since automatic adjustments were adopted in 1975
The National Active and Retired Federal Employees said it was "pleased" that retirees will receive some relief from rising costs.
"NARFE continues to support strong COLAs based on fair assessments of increases in consumer prices, including medical costs, to keep federal annuities in line with inflation," said NARFE president Joseph A. Beaudoin in a statement.
Federal union American Federation for Government Employees pointed out the COLA was "much smaller" than this year's increase, but noted that the situation could be worse under the Simpson-Bowles deficit-reduction plan.
"Under the deficit reduction plan proposed by Morgan Stanley Director Erskine Bowles and ex-Senator Alan Simpson, the annual COLA would be cut by three-tenths of a percentage point. So if Bowles-Simpson were in effect today, retirees would be getting a 1.4% adjustment in January instead of the 1.7% increase," said AFGE National President J. David Cox in a statement.
The COLA increase, however, may be offset by increases in health care, according to a release from the Social Security Administration.
"For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare premiums," the statement said.
The Associated Press contributed to this story.