Good news if you are on Social Security, you may be getting a raise!
If you are one of the 62.5 million people who are currently receiving a social security benefit check each month, good news; the cost-of-living adjustment (COLA) is expected to increase in 2019! The Social Security Administration takes into account the rising cost of goods and services and determines what sort of “raise” beneficiaries will receive in the upcoming year. Their meeting will be in mid-October 2018 but there’s already speculation that there will be a possible raise close to 3% in benefits, the largest increase since 2012.
What would an increase in benefits mean to existing beneficiaries?
A 3% increase would boost the average Social Security benefit of $1,404 per month in 2018 by $42 per month next year. It would also increase the maximum benefit of $2,788 per month for someone retiring at full retirement age in 2018 by about $85 per month in 2019. However, remember that these increases do not include the “delayed retirement credits”. Those who delay claiming their social security benefits beyond their full retirement age earn 8% per year for every year they postpone until age 70.
Some final thoughts on the COLA and how it is Calculated.
How is a COLA calculated?
The Social Security Act spells out a certain formula for determining each COLA. COLAs are based on an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics calculates the CPI-W. Unfortunately, many believe that the CPI-W doesn’t accurately reflect the inflation that seniors (who make up 68% of recipients) face but that’s a blog post for another day.
A COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W for the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective. If there is an increase, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA for the year.
The Senior Citizens League estimates this COLA increase could happen for 2019 but it could change based on the results of the SSA meeting in October 2018. The League conducted a survey between January and March that found that household spending for people age 65 and older rose by more than $79 per month in 2017 – about double the level of the COLA increase received by an average Social Security beneficiary.
One last caveat.
The one caveat is when the COLA increases other things may follow. There are possibilities that other things, such as Medicare, which has a “hold harmless” clause that prevents annual increases exceeding the amount of the COLA increase, could rise as well. It’s important to note that the Social Security COLA increase has not been confirmed and data collected during the remaining portion of the third quarter could change what is expected for 2019.
So, if you are a Social Security beneficiary – don’t hold your breath but you may be getting a raise in 2019.
Have questions? Let us help you answer them.