The government says there will be no benefit increase next year for millions of Social Security recipients, disabled veterans, and federal retirees. It's just the third time in 40 years that payments will remain flat, with all three times occurring since 2010. And there's more bad news: The lack of a benefit increase means that many older people could face higher Medicare costs, an issue that has advocates lobbying Congress. By law, the annual cost-of-living adjustment (COLA) is based on a government measure of inflation. This inflation gauge—which measures price changes for food, housing, clothing, transportation, energy, medical care, recreation, and education—came out Thursday, and the main reason for no benefits increase next year is low gas prices. As of Wednesday, AAA said the average price of a gallon of regular gasoline was $2.30, about 90 cents less than a year ago.
The announcement will affect benefits for more than 70 million people—more than one-fifth of the nation's population. Almost 60 million retirees, disabled workers, spouses, and children get Social Security benefits, with an average monthly Social Security payment of $1,224. The COLA also affects those who get Supplemental Security Income, the disability program for the poor. Congress enacted automatic increases for Social Security beneficiaries in 1975, when inflation was high, and since then, increases have averaged 4% a year. But in the past decade, the COLA has been that big only once. "This is going to be another blow to [people's] retirement income," says a rep for the Senior Citizens League. "It's a huge amount over a lifetime." (Read more Social Security stories.)