Source: Dr. Mike Walden, NCSU COLLEGE OF AG & LIFE SCIENCES, 11/22/11
 

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The federal government recently announced Social Security recipients will get a 3.6 percent increase in their pension next year. For the average Social Security recipient, this amounts to $39 more per month. N.C. State University discusses the reasons for the small increase.

“Well, two reasons … First of all, the … percentage increase in Social Security for retirees is based on how the overall consumer price index changes, which is our broadest measure of how prices change in the economy. And it increased a modest amount … under 4 percent over the last year. So, that’s one reason why the … percentage increase is rather small.

“And secondly why that translates into a small dollar amount … is that Social Security payments for many people are very modest. And they’re modest because they never intended to be the sole source of someone’s retirement source of income in their retirement. So, we have to look at it in that perspective too.

“Now there’s another point here, though, and it’s been around for a long time — that retirees and … groups who represent retirees say that using this overall consumer price index number for the increase isn’t correct for retirees, because retiree spending differs a lot from (that of) people who are not retired.

“In particular, retirees spend much more of their budget on medical care, and that’s been going up much faster than other prices. So, that’s … a long-running debate.

“I will point out one … final thing … that we’ve had these so-called cost of living adjustments for Social Security only since the 1970s. So it could be worse. It could be that if you were here before the 1970s and you’re on Social Security, you wouldn’t be getting any increase at all.”