A dollar doesn't go as far as it did at one time. A soda from a vending machine may have cost 25 cents and a new car or truck may have had a sticker price under $10,000. Inflation leads to prices rising and needing more dollars to buy the same products.
Social Security Disability payments are affected by inflation, and fortunately, they are subject to a Cost of Living Adjustment (COLA) that is used to prevent inflation from eroding a substantial portion of your benefit check. If that is the good news, the bad news is that the Consumer Price Index (CPI) that the Social Security Administration uses may not provide the most accurate picture of the prices actually experienced by the average disabled worker in our area.
The CPI is calculated by taking a survey of prices of goods and services that an average consumer buys. SSA uses the CPI-W from the Bureau of Labor Statistics, which is supposed to measure the goods purchased by Urban Wage Earners and Clerical Workers. You may have guessed that this suggests that these are the goods an average worker might purchase.
If you are disabled, your purchases may differ from that of someone who is perhaps younger and working. For instance, there was no COLA in 2016, largely due to the fall in gasoline prices last year. Of course, if you are disabled, you may not drive much and that price change may not be that meaningful to your spending.
The cost of medical treatment, drugs and other healthcare services may be much more important. These prices tend to go up faster than those captured by the CPI-W and has led to a call for SSA to adopt a different CPI that better measures the prices retirees and the disabled pay.
This has not occurred and while there will be a COLA increase for 2017, it may not be all that noticeable. SSA has announced that it will be 0.03 percent or an average increase of about a $5 per month.
While inflation may have been low, it's likely that most SSD beneficiaries experienced a larger rise in their cost of living than $5 a month, due to increases in the cost of some supplemental Medicare benefits.