Social Security checks will grow in 2019 as inflation rises

Social Security checks will grow in 2019 as inflation rises

Social Security checks to rise by most since 2012

Retirees who are collecting Social Security retirement benefits have reason to cheer: Your Social Security checks will be larger next year.

The Social Security Administration announced that the cost-of-living adjustment for 2019 will be 2.8 percent.

That is in line with the 2.8 percent increase the Senior Citizens League, a nonpartisan organization, predicted last month.

Former President Barack Obama floated — but ultimately dropped — a proposal called chained CPI, which would have slowed annual COLAs to reflect penny-pinching by consumers. Behind it is the idea that when the price of a particular good or service rises, people often respond by buying less or switching to a lower-cost alternative.

Will that extra money in your Social Security check add up to much?

Each year, the Social Security Administration assesses whether there should be an adjustment to benefits, so that their purchasing power keeps up with inflation. The agency uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, CPI-W, from the Bureau of Labor Statistics.

By law, the COLA is based on a broad index of consumer prices. Advocates for seniors claim the general index doesnt accurately capture the rising prices they face, especially for health care and housing. They want the government to switch to an index that reflects the spending patterns of older people.

Bigger Social Security checks in 2019 may not be big enough: AARP

This years increase marks the biggest hike since 2012, when the cost-of-living adjustment was 3.6 percent.

Nonetheless many retirees and their advocates say the annual adjustment is too meager and doesnt reflect higher health care costs for older people. Federal budget hawks take the opposite view, arguing that increases should be smaller to reflect consumers penny-pinching responses when costs go up.

For retirees who have recently elected to take Social Security benefits, this could be the first time they see a “real increase” in their monthly checks, Joe Elsasser, president of Covisum, a provider of Social Security timing software, previously told CNBC.

President Donald Trump has repeatedly vowed not to cut Social Security or Medicare. But the government is running $1 trillion deficits, partly as a result of the Republican tax cut bill Trump signed. Mounting deficits will revive pressure to cut Social Security, advocates for the elderly fear.

For those who are collecting an average Social Security benefit of about $1,400, the 2019 cost-of-living adjustment will amount to an extra $39 per month.

“What the COLA should be based on is still a very real issue,” said William Arnone, CEO of the National Academy of Social Insurance, a research organization not involved in lobbying. “Older people spend their money in categories that are going up at a higher rate than overall inflation.”

The Medicare Part B premiums for next year have not been announced yet. Estimates peg those premiums at $135.50 in 2019 for those with incomes below $85,000.

Following a stretch of low inflation, the cost-of-living adjustment, or COLA, for 2019 is the highest in seven years. It amounts to $39 a month for the average retired worker, according to estimates released Thursday by the Social Security Administration.

In the past the boost from the Social Security cost-of-living adjustment has been eaten up for many by higher Medicare premiums.

Because of compounding, smaller COLAs would have a dramatic effect over time on the federal budget and Social Security finances. But if inflation continues to rise, proposals to scale back cost-of-living adjustments carry greater political risk.

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“The revenue loss in the tax bill contributes to much higher deficits and debt, and that is where the threats begin to come in,” said David Certner, policy director for AARP. “Social Security, and in particular the COLAs, have been the target.”

That is unlikely to happen to as many people this year as it did in 2018, according to Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.

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Social Security checks increasing in 2019 as inflation rises

The number of Social Security beneficiaries with benefits in that range is about 5 million, according to Johnson, though not all of those individuals are necessarily enrolled in Medicare.

Social Security Benefits to Increase 2.8% with 2019 COLA Adjustment

The boost that Social Security benefits see in 2019 will not make up for the buying power benefits have lost over the years.

“Even though were having the highest COLA since 2012, I think people still express frustration because their costs are still increasing faster,” Johnson said.

Social Security benefits have lost 34 percent of their buying power since 2000, according to a study released by the Senior Citizens League in June. While benefits have increased by 46 percent through cost-of-living increases since 2000, senior expenses have risen 96.3 percent, according to the nonpartisan senior group.

Retirees are spending more of their Social Security benefits on health-care costs, according to separate research from the Senior Citizens League released in August.

Medicare premiums and out-of-pocket spending took up one third to one half of Social Security benefits for about 30 percent of retirees, the research found.

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