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Home / Business / It's official! Social Security recipients will receive a big raise in 2019 – The Motley Fool

It's official! Social Security recipients will receive a big raise in 2019 – The Motley Fool



I will not keep you in doubt: social security checks will be 2.8% higher in 2019. This is good news for retirees, but there are some important things that every social security beneficiary needs to consider about the increase. These include the fact that some retirees do not see the full amount of the increase reflected in their checks, and the cause of the increase may indicate that pensioners are making no real progress towards financial security despite rising incomes.

How Social Security Sets Annual Growth

Each year, social security organizations assess the annual price changes for a variety of goods and services using the CPI for local contract workers and employees (CPI-W). , An inflation measure, the CPI-W is intended to represent the cost of living for the typical American employee.

  An elderly woman uses a hoolahoop.

Source: Getty Images.

Specifically, Social Security compares monthly CPI-W scores for the third quarter, with the third quarter coming from last year, which saw an increase in social security. If the CPI-W is higher than in this previous period, Social Security recipients will receive an increase equal to the percentage change in the index. This is referred to as Cost of Living Adjustment (COLA). If the CPI-W is lower than in the previous period, social security revenues remain unchanged compared to the previous year.

For example, the average CPI-W in the third quarter of 2017 was 2% higher than the CPI-W in the third quarter of 2016 (the last year a COLA was granted), so welfare recipients received a 2% increase in their income this year.

This year, the CPI-W increased even more. As can be seen in the following table, the average value in the third quarter of 2018 was 2.8% above the average of Q3 2017, meaning that social security recipients will increase by 2.8% from January onwards.

Consumer price index for urban wage earners and clerical workers (CPI-W)
Year Jul Aug Sep Average % YoY Change
2017 238,617 [19659011] 239,448 240,939 239,668
2018 246,155 246,336 246,565 246,352 2.8%

Data source: Social insurance administration

Not too still upset

The increase is important because social security accounts for more than 50% of the pension income for about half of all married couples. Although the increase in social security contributions by 2.8% year on year is the largest, it will not add so much to the annual income of the average beneficiary.

As of August 2018, this shows the monthly statistical snapshot of Social Security the average retiree collects $ 1,415.94 monthly. This means that typical retirees only see their monthly check rise $ 39.64 and their annual profit increase $ 475.76. Do not get me wrong, no one will complain every year about an extra $ 500. But that's far from a life-changing boost.

There are also Medicare to consider. Many social security beneficiaries have paid their Medicare Part B premium directly out of their social insurance. Medicare premiums also increase every year, but their increase is not determined by the CPI-W. Instead, Medicare increases are dependent on health care costs, which in the past have grown far faster than prices for other goods and services, and that is, premium increases can deeply intervene in annual social security COLA benefits.

  An elderly man shrugs. For example, rising Medicare Part B premiums have resulted in more than 40% of seniors experiencing an increase in social security revenue of $ 5 or less in 2018 despite a 2% COLA senior league. Because of Medicare rewards, only 7% of respondents saw a monthly COLA increase of more than $ 25. </p>
<p>  By 2019, more people should receive more from their benefit than this year, as this year has been significantly impacted by social security , a rule that prevents Medicare Part B premiums from rising by more than the COLA amount of Social Security. There was no Social Security COLA increase in 2016, and in 2017 the COLA increase was tiny. Many social security recipients were unable to "catch up" with the current Medicare premium until 2018. </p>
<p>  Medicare's Part B premium will increase by 1.1% in 2019 to $ 135.50 a month. So if you pay less than this amount, your social security checks may be smaller than you expect next year. According to Medicare, the hold-harm rule will still affect 2 million beneficiaries in 2019. </p>
<p>  It should also not be lost on social security recipients that their COLA increase is inflation-based, which means that it simply reflects how much more you pay for the same goods and services as a year ago. Therefore, because of their COLA, recipients do not advance in real dollar terms. Worse, because Social Security's COLA is based on workers rather than retirees, it does not really reflect the inflation that seniors face, especially because seniors spend so much more on health than their younger, working colleagues. Because of the high cost of the elderly, pensioners have seen their purchasing power drop by 34% since 2000, according to the senior league. </p>
<p>  Overall, it is good news that social security contributions will increase the most in the year 2000, 2019, but the recipients may not want to be too excited about it. </p>
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