Newspaper article The Record (Bergen County, NJ)

Inflation Gauge May Shortchange the Elderly

Newspaper article The Record (Bergen County, NJ)

Inflation Gauge May Shortchange the Elderly

Article excerpt

More than 56 million Social Security recipients will be getting higher payments next year.

But is 1.7 percent -- about $21 a month for the typical recipient -- enough to cover the increase in the cost of living, especially in high-cost areas like North Jersey?

That's a question retirees and economists were asking even before the COLA -- the cost of living adjustment for 2013 -- was announced last week. And even that is likely to be reduced by about $7 a month for higher Medicare Part B premiums that are deducted from Social Security checks.

The year-over-year change in the Consumer Price Index in the third quarter determines how much Social Security recipients will receive in the next year. The problem is that the CPI looks at national prices across a wide range of demographic and geographic sectors, but living expenses differ for many Social Security recipients when compared to the general population, and the COLA does not reflect those differences.

For example, medical costs, which take a big chunk of seniors' budgets, are up 4.4 percent in the last year, while food for home consumption -- a smaller part of most seniors' expenses than for growing families -- rose just 0.8 percent, the Labor Department says.

Also, many people in the Northeast use oil to heat their homes, and it is 4 percent more than a year ago -- and prices are expected to continue climbing. But natural gas users are paying 10.7 percent less than they did 12 months ago.

"It truly can be argued that the CPI has faults when used for a purpose like this," said Scott Hoyt, senior director of consumer economics at Moody Analytics in West Chester, Pa.

"Clearly, there are distortions," Hoyt said by phone. While we recognize weaknesses in the CPI, "what else is there? I don't know what else you would use."

Those distortions are supposed to balance out, but to people like Americo Crecco of Little Ferry, it doesn't work that way, especially with gasoline costing about $3.70 a gallon, 37 cents more than a year ago.

"It's got to be more," Crecco said of the COLA. "Everything has gone up. They give me 1 penny and I need 2 pennies for gas."

It's not just consumers who question the COLA. …

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