AARP’s recent article, “Social Security Payments to Increase 2 Percent Next Year,” reports that Social Security recipients will receive a 2% cost-of-living adjustment (COLA) in 2018. That’s the biggest increase since 2012. This bump, however, won’t be enough to keep pace with the rising costs affecting millions of seniors who depend on the monthly benefit as their prime source of retirement income.
The COLA, announced by the Social Security Administration, will boost the average beneficiary check by $27.38 a month, or about $329 a year. The increase is the largest since a 3.6% hike in 2012.
Even though overall inflation remains relatively low, those seniors on fixed incomes and struggling to make ends meet are feeling an economic bite. For example, average consumer electricity bills are up about 3.5% over 2016, and prescription drug prices continue to soar.
The 2018 COLA could be hindered by higher Medicare Part B premiums. The standard premium is now $134 a month, but many participants pay about $109 a month if they have the fee deducted from monthly benefit payments. A “hold harmless” provision in federal law prohibits Medicare from raising a person’s Part B premiums, if it reduces their Social Security benefits. In the past two years, most Medicare beneficiaries have been held harmless because, without a significant COLA, increasing their premiums would have meant lower Social Security benefits.
In 2018, the COLA will be big enough to permit the increase in premiums. Medicare costs have grown very slowly in the past few years. The increase in premiums some will see next year, is an unfortunate side effect of not having a healthy Social Security COLA in recent years. Medicare Part B premium prices are expected to be announced very soon.
For many, even this small adjustment will be erased by increases in Medicare premiums and other health care costs.
Critics say Congress needs to update the formula used to calculate the yearly COLAs, so it reflects the real expenses that seniors and Americans with disabilities face daily.
The Social Security Administration also announced that the maximum amount of earnings subject to Social Security tax—now $127,200—would increase to $128,700 next year. In 2017, 42 million retirees are receiving Social Security payments averaging $1,377 a month, or about $16,524 a year. With the 2018 COLA, payments will average $1,404 a month, or $16,848 a year.
In its 2017 annual report, Social Security trustees warned that without changes, the Social Security trust fund would be depleted by 2034.
Reference: AARP (October 16, 2017) “Social Security Payments to Increase 2 Percent Next Year”