The following is a summary of an article titled “Silver lining of inflation may be increased by COLA” from Investment News .com June 2017 by Mary Beth Franklin
Social Security beneficiaries have lost nearly a third of their buying power since 2000 as the cost of items typically purchased by the elderly have significantly outstripped the annual inflation increases in their retirement benefits, according to a new report by The Senior Citizens League.
But creeping inflation over the past 12 months may have a silver lining. Based on the Consumer Price Index for this year, the consumer advocacy group estimates that the Social Security cost-of-living adjustment for 2018 will be about 2.1%, significantly higher than the last increase of 0.3%.
Social Security inflation adjustments have averaged only 1% since 2012, including no increase in 2016. COLAs are based on increases in the CPI-W, which measures price inflation for urban workers. The Social Security Administration will make its official announcement about the next year’s COLA in Oct.
Even high-income retirees rely on Social Security for a substantial portion of their income. For nearly a third of retirees with a net worth of $100,000 to $1 million Social Security accounts for at least half of their monthly income, according to a 2016 white paper by the Spectrem Group.
Overall, average medical out-of-pocket expenses for people age 65 and up are nearly double today compared to 2000.
Those higher-income retirees subject to monthly Medicare surcharges may be in for a shock next year. New income brackets, based on 2016 tax returns, take effect in 2018.
While the 2017 S.S. increase will probably be of some help for the average retiree, those in the new higher income brackets it may not be of much help due to the additional high-income surcharge that takes effect in 2018.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.