Social Security has recently announced increased benefits for recipients beginning in 2019. These increases are meant to adjust for inflation. Find out who can benefit from this increase, and why critics say it isn’t enough.
The Social Security Administration (SSA) – has announced that starting in 2019, Social Security checks will increase by 2.8%. The increase is due to the annual cost-of-living adjustment (COLA) and it’s the largest one of its kind in 7 years. The SSA estimates that more than 67 million Americans will receive higher SS benefits next year. Read on to learn what COLA is, which SS recipients can expect to benefit from it, and why some policy groups believe it may be not enough.
The cost-of-living adjustment is an annual increase of financial benefits paid out to Social Security and Supplemental Security Income recipients to accommodate the increased cost of goods and services due to inflation. This automatic yearly increase was ratified by Congress in 1975, at a time when inflation was particularly high. The actual annual rate of COLA is usually equal to the consumer price index for urban wage earners and clerical workers (CPI-W). This index measures price changes for food, housing, clothing, transportation, energy, medical care, recreation, and education and is calculated by the Bureau of Labor Statistics (BLS).
Because it is closely tied to inflation rates and cost fluctuations, the rate of COLA increase varies from year to year and is not always approved. Take the last decade for example. SS benefits were not adjusted at all in 2010, 2011, or 2016 while in 2017 the adjustment amounted to only 0.03%. Therefore, according to the estimates, the cost-of-living adjustment of 2019 will be “the biggest increase most retired baby boomers have gotten”.
Who Will Benefit
According to the SSA’s estimate, one in five Americans will benefit from the increase. The adjustment will affect SS benefits received not only by retired workers but also disabled workers, surviving spouses, and children, as well as low-income, disabled and elderly people who claim Supplemental Security Income.
Beneficiaries will be notified of the increase via email at the beginning of December. The information will also be available on a beneficiary’s “My Social Security” account. It is estimated that a person collecting the average Social Security benefit of $1,400 per month can expect to see a $39 increase per month. However, for those beneficiaries who have their Medicare Part B premiums deducted from their SS benefits, the increase will likely be smaller due to the predicted rise in the cost of premiums in 2019 (the premium amounts have not yet been announced).
Will It Be Enough?
Some advocacy groups fear that the COLA increases will not sufficiently offset the rise in the cost of living for the elderly. The annual increase of the household costs for people 62 years and older is usually far greater than the inflation rates on which CPI-W index – and, in turn, the cost-of-living adjustment – is based.
For example, due to inflation and rising costs of living, Social Security beneficiaries lost 34% of their buying power compared to the year 2000. This has been seemingly been addressed by the COLA increases – the monetary amount of the benefits rose by 46%. However, the average costs of living for senior citizens have risen 96.3% in the last 18 years. For example, the annual average expenses on prescription drugs grew by 188% – from $1,102.00 in 2000 to $3,172.72 in 2018 while total medical out-of-pocket expenses for citizens aged 65 and above rose by 117% – from $6,140.00 to $13,304.00.
If you have lost your ability to work as a result of a long-standing illness or disability, you may be eligible for Social Security benefits. Similarly, if you are struggling financially due to an extremely low income, you may be in the position to apply for Supplemental Security Income. You will find more information about these two benefit programs managed by the SSA – and an explanation of how to apply – on our website.