It’s the only the third time in 40 years that millions of Social Security recipients which includes disabled veterans and federal retirees can expect to see no increase in benefits next year. This is really unwelcome news for more than one-fifth of the nation’s population.
Why is this happening? They can blame current low gas prices.
This is because by law, the annual cost-of-living adjustment, or “COLA”, is based on a government measure of inflation. This has been dragged down by lower prices at the pump.
Currently, the government is scheduled to announce the COLA — or lack of one — on Thursday, when it releases the Consumer Price Index for September.
Inflation has been so low this year that economists say that there is little chance the September numbers will produce a benefit increase for next year much to the dismay of many. The COLA is calculated by comparing consumer prices in July, August and September each calendar year with prices in the same three months from the previous year.
This means if prices go up, benefits go up. But if prices drop or stay flat during this time period, benefits will stay the same. 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 average price changes for things like food, housing, clothing, transportation, energy, medical care, recreation and education in the United States.
For more information see this article from Yahoo! Finance.