Update: The Social Security Administration announced a 2% cost of living adjustment (COLA) for Social Security recipients for 2018.
The bad news is that inflation is rising. The good news is that retirees might finally get a decent Social Security increase in 2018.
Although the official announcement about the Social Security COLA won’t be until October, based on inflation data so far this year, retirees could receive an increase in benefits of approximately 2 to 2.2 percent.
This is good news as recent Social Security increases have been minimal. In the last 10 years, the average COLA has been 1.56%. The increase for 2017 was a measely 0.3% and there were three years in the last decade where Social Security recipients received no increase in benefits.
According to The Senior Citizens League, seniors have lost almost a third of their buying power since 2000 as costs that retirees typically have (such as housing, food and health care) have outpaced the Social Security increases they have received.
For the majority of Social Security recipients, their benefits make up 50 percent of their total income. A third of the people who receive Social Security say their benefits make up 90 percent of their income. For these people its crucial that Social Security increases keep up with the rising costs of health care, food and housing.
Social Security COLA Not Keeping Up with Retiree Costs
One of the biggest benefits of Social Security has been the annual cost of living adjustment to help senior’s income keep up with rising costs. Unfortunately, the COLA is calculated based on the CPI-W, which focuses more on the expenses of workers. A better measure would be the CPI-E, or the Consumer Price Index for the Elderly. This index gives heavier weight to housing costs, which are typically a much greater percentage of a retiree’s budget.
Should Seniors Get a One-Time Payment to Make Up for the Small Social Security 2017 COLA?
After the SSA announced there would not be a COLA for 2016, a bill was introduced in Congress that would provide a one-time payment to Social Security recipients. It didn’t pass at time; however, it was reintroduced after the low (0.3%) 2017 COLA was announced. The bill called for a payment of $581 for all Social Security recipients to make up for the low COLAs in the last few years. Unfortunately, this was right before the presidential election and has not been followed up on since.
Getting the Maximum Social Security Benefits
Since Social Security makes up a large portion of retirees’ income, it’s important to maximize your benefit as much as possible. Some ways to do this include maximizing your earnings before you retire, working longer, delaying your benefits, and taking advantage of spousal benefits.