Retirees Getting a Bump in Social Security Benefits
Largest increase in benefits in the last few years — 2.8 percent
By Deborah Jeanne Sergeant
If you get Social Security benefits, you have likely begun receiving an increase in your check of 2.8 percent in January. That’s an improvement over recent years. In 2016, no one received an increase. In 2017, it increased by a paltry 0.3 percent. Last year was at 2 percent.
About 67 million are receiving the bump in income. In October 2018, the Social Security Administration paid $63.8 billion in retirement benefits, averaging $1,373.66 per month per retiree.
Why doesn’t the cost of living increase seem to keep pace with inflation in some years, especially for retirees who need costly medication to stay healthy and enjoy a better quality of life? And what decides when and how much benefits should increase?
A caveat of Social Security increases is sometimes Medicare premiums increase, too, negating an increase benefit for those using Medicare. This year, the premium increase starts at $1.50 and goes on up for larger income households, based on tax returns from 2017, not the 2018 tax returns.
“Because Medicare rates are also rising fast, most people haven’t been ahead in recent years,” said Randy Zeigler, certified financial planner with Ameriprise Financial Services in Oswego. “Social Security is adjusted for inflation but because of the withdrawals for Medicare in the past, it doesn’t feel like the Social Security benefit increase is that helpful, because health costs rise faster than the rest of inflation.”
While it’s good news for most American retirees that Medicare costs won’t outstrip Social Security increase, many wonder how long the trend will continue.
As inflation increases, showing a strong economy, Social Security payments are supposed to keep pace with the cost of living. Adjustments to the checks “theoretically, are supposed to keep up with cost of living,” Zeigler said. “I think that Social Security will continue to rise because we expect inflation to rise a little as well.”
The driving factor behind how much retirees receive is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) issued by the Department of Labor.
While viewpoints vary on how long the increases will continue and how much future increases will be, this is the largest increase in seven years, according to Sonnet Loftus, a certified financial planner professional with Michael, Roberts Associates Inc. in Syracuse.
“The increase is meant to help retirees keep up with rising inflation,” Loftus said. “By law, if the Consumer Price Index continues to increase, then Social Security benefits will follow suit.”
The CPI-W influence on Social Security payments is supposed to help retirees afford what they need for basic living expenses like goods and services; however, for many retirees of modest means, the cost of health care represents a major spending category.
“Health care costs outpace the cost of living, typically,” said Ryan York, financial advisor and CEO of Pinnacle Capital Management in East Syracuse. “Social Security is being used less for retirement and more for covering medical care at this point.”
If you want to know your benefit before the first check arrives, you can sign up for or log into an account at https://www.ssa.gov/cola for free information. As another change for 2019, retirees can choose to receive their cost of living adjustment information online or continue to receive it in the postal mail as always.