SSA’s COLA Increase for 2019 Could be the Highest in 7 Years
Social Security’s COLA increase in 2019 is estimated to be 3%, the highest in 7 years. This article examines what this increase means to retired Americans.
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Most American retirees receive social security benefits, which comprise the major part of their regular income during their retirement. People already receiving disability benefits from the Social Security Administration (SSA) based on a medical record analysis and other required formalities, will find their disability benefits convert into retirement benefits. Social Security’s monthly payments take into consideration the rate of inflation, and consequently, recipients get benefit increases every January in keeping with the increasing prices. To calculate the appropriate increase each year, the SSA studies a particular measure of inflation that the Bureau of Labor Statistics provides every month. The CPI-W or Consumer Price Index for urban wage earners provides the readings that are required to calculate each year’s COLA. To be ready to make an increase every January, the SSA considers the inflation readings for the CPI-W during the months of July, August, and September. The average CPI-W figure for these 3 months is compared with the corresponding average for the same three months in the previous year. If the figure is lower, it indicates deflation and no adjustment is made. If the figure is higher, the percentage increase is calculated and rounded to the nearest tenth of a percent. To calculate the amount to expect in 2019, take your gross social security benefit amount before any deductions for Medicare payments or other charges, and increase it by the COLA percentage. A new estimate released by The Senior Citizens League, representing more than one million retirees says the annual Social Security Cost-of-Living Adjustment (COLA) estimated for 2019 – 3% -would be the largest increase in 7 years. How is this increase notable? 3% increase in COLA would increase the average Social Security benefit of $1,404 per month in 2018 by $42 per month in 2019; and the maximum Social Security benefit of $2,788 per month for a person retiring at full retirement age in 2018 will be increased by $85 per month in 2019.The predicted 2019 increase represents the highestCOLA since the year 2012, when it was 3.6%. In 2018 the COLA WAS 2%; there was no COLA in 2016; and it was 0.3% in 2017. The 2019 estimate is based on consumer price index (CPI) data through April 2018. The COLA increase would be officially announced only in October 2018, and this estimate could change because there are several months of CPI to consider before it is announced.
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But are retirees really excited about this projected increase? Probably no, because retired Americans are experiencing cost increases in common household expenditures that are increasing several times faster than 3%. According to the Senior Citizens League, from January 2017 to January 2018, the costs of home heating oil has increased more than 22% and the cost of Medigap premiums have increased by 16%. The League surveyed more than 1,130 retirees between January and March 2018 and found that household expenditure rose by more than $79 per month in 2017 for 55% of survey participants. When the COLA increased 2% in 2018 and increased the average Social Security benefits by around $27 a month, the basic Medicare premium also increased by $25 a month after remaining steady for many years. This almost nullified the COLA increase. Retirees are concerned whether such a situation could occur in 2019. As a company providing medical chart reviews for Social Security lawyers, we understand that experienced lawyers will be able to provide the right information regarding various aspects affecting one’s retirement or disability benefits. Any COLA increase will always correspond to increased costs for some commodity or other, because the SSA uses price levels to calculate cost of living adjustments. To know for sure what the final 2019 COLA increase will be, we have to wait until October 2018. Meanwhile, it would be worthwhile for retirees to consider what this predicted increase means for them in terms of purchasing power.
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