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2019 Social Security COLA Increase

Social Security recipients will see a 2.8 percent increase in their monthly checks starting in January, the largest increase since 2012. The cost of living adjustment was announced after the Bureau of Labor Statistics released inflation data for September.

How is Social Security COLA calculated?

COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics.The CPI-W is a subset index of the overall CPI, which tracks prices on food, clothing, housing, fuel, transportation, medical services, and other expenditures.

The COLA is based on changes in the year-over-year inflation rate for the third quarter, which comprises July, August and September. July and August saw inflation rates of 3.2 percent and 2.9 percent, respectively. Early projections had the COLA increase at over 3 percent, however, inflation in September was less than expected at 2.3 percent.

Critics fault the use of the CPI-W

Despite the increase, retirees argue that the CPI-W inaccurately predicts the spending habits and cost of living for the elderly. The Bureau of Labor Statistics discovered that the discrepancies in measuring the cost of living can be attributed to an escalation of health care inflation and the fact that seniors are consume more medical services.  In recent years, studies show that health care inflation has in fact slowed.

In previous years, the COLAs were largely negated by increases in Medicare Part B premiums, which are deducted from Social Security checks. Medicare premium adjustments will be announced later this fall.

Research from the Senior Citizens League released earlier this year shows seniors’ actual cost of living has increased at twice the rate of COLA increases. The average monthly Medicare Part B premium was $45.50 in 2000. It was $134 in 2018, accounting for a 195 percent increase, according the Senior Citizens League’s research.

How does COLA breaks down into dollars?

For retirees receiving maximum benefits, the COLA will amount to a $73 monthly increase.  The maximum Social Security benefit will be $2,861 a month in 2019.

The average benefit increase for all retirees will be a $39 month. The average monthly combined benefit increase for retired couples will be $67.

The average benefit for retired widows and widowers will increase to $1,386, and the average monthly benefit for disabled workers with a spouse and at least one child will increase to $2,130.

 

Source:

BenefitsPro, by, Nick Thornton

 

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