Inflation was 2.9 percent in August, says the Bureau of LaborStatistics. September's number will determine 2019's SocialSecurity COLA increase. (Photo: Shutterstock)

Social Security's beneficiaries can expect a bump in benefits in2019, courtesy of a Cost of Living Adjustment, which will beformally announced October 11.

Social Security COLAs reflect inflation ratesand are based on third quarter measurements of the Consumer PriceIndex for Urban Wage Earners and Clerical Workers, or theCPI-W.

Inflation in July was 3.2 percent, and 2.9 percent in August,according to the Bureau of Labor Statistics. September's numberwill determine if next year's COLA increase will exceed 3 percent,the highest increase since 2011, when Social Security checks increased 3.6 percentafter two years of no COLA increases.

Actuaries at the Senior Citizens League, which advocates forretiree rights, have revised its COLA projection to 2.8 percent,down from an earlier projection of 3.3 percent.

In order to drop to 2.8 percent for the quarter, September wouldhave to post a lack luster inflation rate of 2.3 percent, somethingAdam Kamins, an economist with Moody's Analytics, does notexpect.

“The broader fundamentals point to higher inflation,” Kaminstold BenefitsPRO. “It's hard to imagine a scenario where you wouldsee a really sharp drop off in September's number—at least notanywhere near the extent implied in a 2.8 percent COLA.”

Hawkish monetary policy from the Federal Reserve—Moody's Analytics and othersare predicting two more rate increases this year—will be the chieffactor in keeping inflation in check, said Kamins.

But a litany of other factors suggests September won't seeslowed inflation.

The highest level of wage growth in a decade was reportedearlier in the month, with unemployment holding under 4 percent.The latest salvo of tariffs on Chinese imports—and China'sresponse—augur for increases in the price of goods. And the TrumpAdministration is prepping new sanctions on Iran in November, whichis expected to tighten global oil supplies. Some analysts arepredicting the price of crude will hit $100 a barrel.

“Our expectation is inflation will continue on the path it'sbeen on for the year,” said Kamins.

Another $500 for average retiree

About 60 million Americans receive monthly checks from theSocial Security Administration, 43 million of whom are retirees.The average monthly check after last year's 2 percent COLA increasewas $1,404, or $16,848 a year.

A 3 percent COLA increase would amount to a $42.12 increase inmonthly checks, or an annual raise of $505.44.

The CPI-W is a subset of the Consumer Price Index for All UrbanConsumers, or CPI-U. Both CPIs are based on the prices of food,clothing, shelter, fuel, transportation, medical services, drugs,and other goods and services that people buy for day-to-day living.The CPI-W represents about 29 percent of the total U.S.population.

The Senior Citizens League argues that the CPI-W indexrepresents an inaccurate calculation of retirees' spending habitsand true cost of living. The group advocates using the ConsumerPrice Index for the Elderly, or CPI-E, to calculate Social SecurityCOLAs.

The BLS has been running an experimental CPI-E index. Between1982 and 2011, the CPI-E rose at an average annual rate of 3.1percent, compared to 2.9 percent for the CPI-W. Most of thedifference was accounted for by escalating health care inflationand the fact the seniors consume more medical services. Morerecently, the CPI-E has tracked with the CPI-W as health careinflation has slowed.

Social Security checks account for 33 percent of all income forelderly Americans, according to the Social Security Administration.About half of married retirees derive half of their income fromSocial Security; 21 percent of married retirees and 44 percent ofsingle retirees rely on Social Security for 90 percent of theirincome.

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