Retirement Income Toolbox

July 15, 2018

This month I wanted to share an article that may have some great news for those retirees on Social Security.  It was written by Mary Beth Franklin and appeared in the June 11, 2018 version of Investment

Social Security COLA could top 3%

The Annual Social Security cost-of-living adjustment for 2019 could top 3% in 2019, which would be the largest increase in seven years, according to a new estimate released by The Senior Citizens League, a nonpartisan advocacy group representing more than 1 million retirees.

A 3% increase would boost this year’s average Social Security benefits of $1404 per month by $42 per month next year and increase the maximum benefit of $2788 per month for someone retiring at full retirement age in 2018 by about $85 per month in 2019.

Delay Claims

 The average and maximum Social Security benefits do not include delayed retirement credits.  Social Security recipients who delay claiming benefits beyond full retirement age earn an additional 8% per year for every year they postpone benefits up to age  70.

A 3% COLA in 2019 would be the biggest annual hike since 2012 when Social Security benefits grew by 3.6%.  This year the COLA was 2% following a meager 0.3% increase in 2017 and no increase in 2016.


The COLA estimate for 2019 is based on consumer price index data through April.  The unofficial estimate by The Senior Citizens League, although normally very reliable, could change depending on the results of the next several months of CPI date before the COLA is officially announced in October.  Social Security COLAs are based on the increase in the CPI-W, which measures price inflation for urban workers, from the third quarter of the prior year (July, August, and September) to the corresponding third quarter of the current year.

“After the past nine years of COLAs averaging just 1.2%, one would think that people living on Social Security would be dancing in the streets,” said Mary Johnson, a policy analyst at the Senior Citizens League.  “But in reality, retirees are experiencing cost increases in common household expenses that are growing several times faster than 3%,” she said.


The group’s annual survey of more than 1,100 retirees, conducted between January and March, found that household spending for people age 65 and older rose by more than $79 per month in 2017 for more than half of the respondents – about double the level of the COLA increase received by the average Social Security beneficiary.

“The trend of retiree costs growing faster than the COLA has been consistent over the past eight years and our research indicates this will continue in 2019,” Ms. Johnson said.


The Senior Citizens League survey found that premiums for supplemental Medicare insurance policies, known as Medigap plans, increased an average of 16% last year and total out-of-pocket medical expenses grew by about 10%.  The price of typical grocery items such as potatoes, tomatoes, oranges, and eggs all increased by 10% or more last year, and the cost of home heating oil soared by 22%. 

If Social Security benefits increase next year, Medicare premiums for the typical retiree could increase as well.

A “hold harmless” provision prohibits annual increases in Medicare Part B premiums from exceeding the dollar amount of the COLA increase in annual Social Security benefits to protect most retirees from a net decline in Social Security benefits from year to year.  Medicare Part B premiums, which pay for doctor’s fees and outpatient services, are normally deducted directly from Social Security benefits.

2018 Example

The 2% COLA increase in 2018, which boosted average Social Security benefits by about $27 per month allowed the basic Medicare premium to jump by $25 per month after remaining steady for several years.  As a result, the higher Medicare premiums virtually wiped out the COLA increase.  A similar situation could occur next year.  The hold-harmless provision applies to about 70% of retirees who have their Medicare premiums deducted directly from their monthly Social Security payments.  The remaining 30% are not protected because they: are not protected because they: do not receive Social Security benefits, are directly billed for Medicare Part B premiums, are newly enrolled in Medicare or pay a high-income Medicare premium surcharge.

Individuals with modified adjusted gross income of $85000 or more and married couples who joint income exceeds $170000 pay a high-income surcharge on both their Medicare Part B and Part D prescription drug plan premiums.  Surcharges are based on the last available federal income-tax return, so 2018 premiums are based on 2016 income.  This year, high-income Medicare beneficiaries pay premiums ranging from $187.50 - $428.60 per month per person, depending on income, compared to the standard premium of $134 per month.  Next year, a new top-tier surcharge will be added for individuals with income of $50000 or more in 2017 and married couples whose joint income topped $750000.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual planning.  Situations discussed are for illustrative purposes only and will be different for each individual’s situation.

This information is not intended to be a substitute for specific individualized retirement planning advice. We suggest that you discuss your specific issues with your financial advisor.