First Cost of Living Adjustment in Three Years Remains Likely, Will Impact Budget Deficit and Length of Social Security Solvency.

Piece from National Association of Realtors HERE forecasts a 3.5% annual adjustment in cost of living index used to adjust Social Security, SSI, and federal/military retirement pay.  Data out yesterday shows a 3.21% increase for last three months vs July-Sept 2008 data; the actual adjustment amount will be determined by the next three months of data compared to same period in 2008. 

NAR piece also points out that projected increase is larger than is used in current Social Security actuarial assumptions and that change upward would reduce the period of solvency of the SS fund. Similarly, if current budget assumptions used a projection less than projected increase, it is likely the CBO at some point will score the budget deficit higher because of the higher projected increase in the COLI. 

For the many assisted rental tenants receiving SSI or SS this could be the first direct increase in income they will have received in the three years. Rental programs where tenant paid rent is a function of income could see a very minor decrease in subsidy needs (if rent level remained constant) as tenant portion of rent paid should increase by 30% of the COLI % increase. 

Orginally created and posted on the Oregon Housing Blog.

COLA Used for Social Security and Other Programs Will be VERY Small or ZERO For Second Year in a Row.

Calculated Risk explains why HERE . Short version is that COLA increase will ONLY occur if third quarter 2010 index is higher than 2008 (NOT 2009) third quarter index (the third quarter 2008 index was higher than third quarter 2009 index).

(I have seen in a CBO document that they are using a projected .1% increase for SS COLA's this year, so it is possible that the increase will not be zero. A .1% increase on a $1,000 monthly benefit would be a monthly increase of ONE dollar or 12 dollars a year).

Most favorable way of looking at COLA increase process is that 2008 provided a windfall that was not recaptured when index went down (and has yet to get back to 3rd quarter 2008 level). How adequately official index captures actual cost of living expenses for retirees is another question, especially if greater share of elderly budgets for medical expenses are not properly reflected in index.

Increased Rent Burdens?
With a zero increase, renters whose sole or primary source of income is Social Security or SSI will have increasing cost burdens if rents increase, even if increase is only enough to cover increased property expenses.

Originally created and posted on the Oregon Housing Blog.