It’s a situation that many retirees haven’t seen since 2012. A noticeable boost to net Social Security benefits is expected for 2019. While the annual cost of living adjustment (COLA) won’t be announced until October 11th, recent CPI data indicates that next year’s Social Security COLA will be about 3.3%. What’s more, Medicare Trustees have estimated that monthly Part B premiums will only grow about $1.50.
This will be the first such increase in nearly a decade of little to no cost-of-living adjustments (COLAs). Since 2010, the annual COLA has averaged just 1.2% per year. A 3.3% COLA would raise the average Social Security benefit of $1,300 by $42.90 per month. That would be an increase the size of which many retirees have never seen.
COLAs in recent years have been at unprecedented lows. Consider 1981 and 1982 when the highest COLAs in Social Security’s history were paid, 14.3% and 11.2% respectively. However, that period had such unexpectedly high inflation that it almost bankrupted Social Security, and triggered the largest major reform of the program in history.
More recently from 2000 to 2010, COLAs averaged a more reasonable 4% per year. With the Great Recession in 2009, however, inflation took a severe nosedive and remained relatively flat until 2018. Although Social Security recipients received a COLA of 2% this year, steep increases in Medicare Part B premiums took most or all of the COLA increase.
According to TSCL surveys, retirees’ actual costs consistently grow at a faster pace than COLAs. In 2018 the 2% COLA raised average Social Security benefits by about $26. Yet according to The Senior Citizens League’s annual survey of more than 1,130 retirees, conducted between January and March of 2018, household spending rose by more than $39 per month in 2017 for 79% of survey participants.
The survey question asked:
“Which of the following most closely represents the amount that your total monthly expenses increased or decreased during 2017?” Here’s how survey respondents answered:
Expenses stayed the same or went down 8%
$.01 - $39.00 13%
$39.01 - $79.00 24%
$79.01 - $119.00 24%
More than $119.00 31%
The majority of the 59 million Americans who receive Social Security depend on it for at least 50 percent of their total income, and one-third of all beneficiaries rely on it for 90 percent or more of their income. To help protect the buying power of benefits, The Senior Citizens League supports legislation that would strengthen the COLA in three ways:
- Calculate COLAs based on the consumer price index that better reflects the spending patterns of retirees - the Consumer Price Index for the Elderly (CPI-E).
- Provide a modest boost in monthly benefits to retirees, to make up for years when no COLA or only an extremely low COLA was paid.
- Guarantee a minimum COLA of no less than 3 percent.