Social Security checks will be larger in 2019
Recipients will get a 2.8% boost in benefits as inflation creeps up.
Tens of millions of Social Security recipients and other retirees will get a 2.8% boost in benefits next year as inflation edges higher. It’s the biggest increase most retired baby boomers have received.
After a stretch of low inflation, the cost-of-living adjustment, or COLA, for 2019 is the highest in seven years. It amounts to $39 a month for the average retired worker, according to estimates released Thursday by the Social Security Administration.
The adjustment affects household budgets for about 1 in 5 Americans, including Social Security beneficiaries, disabled veterans and federal retirees. That’s about 70 million people, enough to send ripples through the economy.
Unlike most private pensions, Social Security has featured inflation protection since 1975. Beneficiaries also gain from compounding since cost-of-living adjustments become part of their underlying benefit, the base for future cost-of-living increases.
Nonetheless, many retirees and their advocates say the annual adjustment is too meager and doesn’t reflect higher healthcare costs for older people. Federal budget hawks take the opposite view, arguing that increases should be smaller to reflect consumers’ penny-pinching responses when costs rise.
With the adjustment, the estimated average monthly Social Security payment for a retired worker will be $1,461 a month next year.
“For more recent retirees, the 2019 COLA will be the largest increase they have gotten to date,” said policy analyst Mary Johnson of the nonpartisan Senior Citizens League.
Danette Deakin, a retiree from Bolivar, Mo., said she feels as though her cost-ofliving adjustment is already earmarked for rising expenses.
Her Medigap insurance for costs not covered by Medicare is going up, and so is her prescription drug plan. She expects her Medicare Part B premium for outpatient care will rise too.
“It isn’t enough of an increase that it takes care of all of the increases from healthcare, plus rent — our rent gets increased every year,” said Deakin, 70, who worked in the finance department at a boat dealership.
Healthcare costs eat up about one-third of her income, she estimated.
“I appreciate the COLA adjustment, and in no way am I complaining,” Deakin added. “It’s just that every single thing you can talk about goes up. It doesn’t go down.”
By law, the adjustment is based on a broad index of consumer prices. Advocates for seniors claim the general index doesn’t accurately capture the rising prices they face, especially for healthcare and housing. They want the government to switch to an index that reflects the spending patterns of older people.
“What the COLA should be based on is still a very real issue,” said William Arnone, chief executive of the National Academy of Social Insurance, a research organization not involved in lobbying. “Older people spend their money in categories that are going up at a higher rate than overall inflation.”
The adjustment is now based on the consumer price index for urban wage earners and clerical workers, or CPI-W, which measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.
Advocates for the elderly would prefer the CPI-E, an experimental measure from the government that ref lects costs for households headed by a person 62 or older. It usually outpaces general inflation, though not always.
Cost-of-living adjustments can be small or zero, as was the case in several recent years. People often blame the president when that happens. However, the White House can’t dictate the adjustment, which is calculated by nonpolitical experts.
President Trump has repeatedly vowed not to cut Social Security or Medicare. But the government is running $1-trillion deficits, partly as a result of the Republican tax-cut bill Trump signed.
Advocates for the elderly fear that mounting deficits will revive pressure to cut Social Security.
“The revenue loss in the tax bill contributes to much higher deficits and debt, and that is where the threats begin to come in,” said David Certner, policy director for AARP. “Social Security, and in particular the COLAs, have been the target.”
Former President Obama floated — but ultimately dropped — a proposal called chained CPI, which would have slowed annual cost-of-living adjustments to reflect penny-pinching by consumers.
Behind it is the idea that when the price of a particular good or service rises, people often respond by buying less or switching to a lowercost alternative.
Because of compounding, smaller adjustments would have a dramatic effect over time on the federal budget and Social Security finances. But if inflation continues to rise, proposals to scale back cost-of-living adjustments carry greater political risk.
Beyond federal budget woes, Social Security faces its own long-term financial problems. It’s expected to stop being able to pay full benefits starting in 2034.
Social Security is financed by a 12.4% tax on wages, with half paid by workers and the other half paid by employers. Next year, the maximum amount of earnings subject to the Social Security tax will increase to $132,900 from $128,400.
About 177 million workers pay Social Security taxes. Of those, nearly 12 million workers will pay more in taxes because of the increase in taxable wages, according to the Social Security Administration.