Extra $24 a month won't go very far

WASHINGTON – With essentials like food, gasoline and medical care all rising at a faster clip, an extra $24 a month likely won’t go very far. But that is the boost the typical retiree will see in Social Security checks come January.

The 2.3 percent increase in the cost-of-living adjustment that will go to 50 million Social Security recipients is the smallest in four years even though many prices are rising more quickly this year than last year.

Blame it on the vagaries of how the government computes the annual COLA. The price change is based on the amount the Consumer Price Index increases from July through September from one year to the next.

In the past two years, using the third quarter as a benchmark boosted the inflation adjustment, especially the 2006 increase, because it reflected the fact that gasoline and other energy products soared in September 2005 after Gulf Coast refineries shut down in the wake of Hurricane Katrina.

But this year, energy costs, which were up in the spring, have been falling in the summer, a fact that lowered the COLA change. However, analysts are expecting energy prices to resume rising in coming months given a recent run-up in global oil markets that has seen crude oil prices at record highs, close to $90 per barrel.

“Retirees are going to feel a disconnect this year between the COLA increase and the reality of the inflation they face,” said Mark Zandi, chief economist at Moody’s Economy.com. “If this calculation were done in another three months, it would be measurably higher.”

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