Congress adopted the measure in the 1970s, and since then it has resulted in annual benefit increases averaging 4.2 percent. But there was no COLA in 2010 or 2011 because inflation was too low. That was small comfort to the millions of retirees and disabled people who have seen retirement accounts dwindle and home values drop during the period of economic weakness, said David Certner, legislative-policy director for the AARP.
“People certainly feel like they are falling behind, and these are modest-income folks to begin with, so every dollar counts,” Certner said. “I think sometimes people forget what seniors’ incomes are.”
Some of the increase in January will be lost to higher Medicare premiums, which are deducted from Social Security payments. Medicare Part B premiums for 2012 are expected to be announced next week, and the trustees who oversee the program are projecting an increase.
Monthly Social Security payments average $1,082, or about $13,000 a year. A 3.5 percent increase would amount to an additional $38 a month, or about $455 a year.
Mark Zandi, chief economist at Moody’s Analytics, said that the COLA would give a boost to consumer spending next year, amounting to about $25 billion in government support, or 0.2 percent more economic growth, if beneficiaries spend it all.
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