2019 Social Security cost-of-living adjustment could top 3 percent

Unofficial estimate would be largest increase since 2012, but retiree costs are growing even faster.
JUN 04, 2018

The annual Social Security cost-of-living adjustment for 2019 could top 3% in 2019, which would be the largest increase in seven years, according to a new estimate released by The Senior Citizens League, a nonpartisan advocacy group representing more than 1 million retirees. A 3% increase would boost the average Social Security benefit of $1,404 per month in 2018 by $42 per month next year and 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. The average and maximum Social Security benefits do not include delayed retirement credits. Social Security recipients who delay claiming benefits beyond full retirement age earn an additional 8% per year for every year they postpone benefits up to age 70. A 3% COLA in 2019 would be the biggest annual hike since 2012, when Social Security benefits grew by 3.6%. This year the COLA was 2%, following a meager 0.3% increase in 2017 and no increase in 2016. The COLA estimate for 2019 is based on consumer price index data through April. The unofficial estimate by The Senior Citizens League, although normally very reliable, could change depending on the results of the next several months of CPI data before the COLA is officially announced in October. Social Security COLAs are based on the increase in the CPI-W, which measures price inflation for urban workers, from the third quarter of the prior year (July, August and September) to the corresponding third quarter of the current year. "After the past nine years of COLAs averaging just 1.2%, one would think that people living on Social Security would be dancing in the streets," said Mary Johnson, a policy analyst at The Senior Citizens League. "But in reality, retirees are experiencing cost increases in common household expenses that are growing several times faster than 3%." The group's annual survey of more than 1,100 retirees, conducted between January and March, found that household spending for people age 65 and older rose by more than $79 per month in 2017 for more than half of the respondents — about double the level of the COLA increase received by the average Social Security beneficiary. "The trend of retiree costs growing faster than the COLA has been consistent over the past eight years and our research indicates this will continue in 2019," Ms. Johnson said. The Senior Citizens League survey found that premiums for supplemental Medicare insurance policies, known as Medigap plans, increased an average of 16% last year and total out-of-pocket medical expenses grew by about 10%. The price of typical grocery items such as potatoes, tomatoes, oranges and eggs all increased by 10% or more last year, and the cost of home heating oil soared by 22%. If Social Security benefits increase next year, Medicare premiums for the typical retiree could increase as well. A "hold harmless" provision prohibits annual increases in Medicare Part B premiums from exceeding the dollar amount of the COLA increase in annual Social Security benefits to protect most retirees from a net decline in Social Security benefits from year to year. Medicare Part B premiums, which pay for doctors' fees and outpatient services, are normally deducted directly from Social Security benefits. The 2% COLA increase in 2018, which boosted average Social Security benefits by about $27 per month, allowed the basic Medicare premium to jump by $25 per month after remaining steady for several years. As a result, the higher Medicare premiums virtually wiped out the COLA increase. A similar situation could occur next year. The hold harmless provision applies to about 70% of retirees who have their Medicare premiums deducted directly from their monthly Social Security payments. The remaining 30% are not protected because they do not receive Social Security benefits; are directly billed for Medicare Part B premiums; are newly enrolled in Medicare; or pay a high-income Medicare premium surcharge. Individuals with modified adjusted gross income of $85,000 or more and married couples whose joint income exceeds $170,000 pay a high-income surcharge on both their Medicare Part B and Part D prescription drug plan premiums. Surcharges are based on the last available federal income tax return, so 2018 premiums are based on 2016 income. This year, high-income Medicare beneficiaries pay premiums ranging from $187.50 to $428.60 per month per person, depending on income, compared to the standard premium of $134 per month. Next year, a new top tier surcharge will be added for individuals with income of $500,000 or more in 2017 and married couples whose joint income topped $750,000. (More: Even the strongest retirement plans can be derailed by health care costs)

Latest News

Farther debuts AI investment proposal tool for advisors to win clients
Farther debuts AI investment proposal tool for advisors to win clients

"Im glad to see that from a regulatory perspective, we're going to get the ability to show we're responsible [...] we'll have a little bit more freedom to innovate," Farther co-founder Brad Genser told InvestmentNews.

Are you optimally efficient?
Are you optimally efficient?

Taking a systematic approach to three key practice areas can help advisors gain confidence, get back time, and increase their opportunities.

Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida
Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida

Meanwhile, Osaic lures a high-net-worth advisor from Commonwealth in the Pacific Northwest.

Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B
Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B

The deals, which include its first stake in Ohio, push the national women-led firm up to $47 billion in assets.

RIA moves: RWA Wealth Partners strengthens leadership as $8B Procyon widens Northeast footprint
RIA moves: RWA Wealth Partners strengthens leadership as $8B Procyon widens Northeast footprint

The Dynasty Financial partner firm's latest deal in Connecticut adds roughly $600 million in client assets.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.