Social Security's more than 67 million beneficiaries will see a 2.8 percent increase in monthly checks beginning in January of 2019.

The cost of living adjustment was announced after the Bureau of Labor Statistics released inflation data for September, which was considerably lower than previous projections.

Here's how the COLA breaks down into dollars:

Retirees receiving maximum benefits: The COLA will amount to a $73 monthly increase in checks for those receiving the maximum Social Security benefit, which will be $2,861 a month in 2019.
Average for all retirees: It will mean a $39 a month increase in the average benefit for all retirees, which will be $1,461 in 2019.
Retired couples: The average combined benefit for retired couples will increase $67 a month, to $2,448.
Retired widows, widowers: The average benefit for retired widows and widowers will increase to $1,386.
Disabled workers: The average monthly benefit for disabled workers with a spouse and at least one child will increase to $2,130.

How the Social Security COLA is calculated

The COLA is based on changes in the year-over-year inflation rate for the third quarter, which comprises July, August and September.

July and August saw inflation rates of 3.2 percent and 2.9 percent, respectively. Those more robust numbers encouraged early projections that the COLA bump would eclipse 3 percent or more.

But inflation in September was slack. The Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which the Social Security Administration uses to calculate COLAs, posted a 2.3 percent increase over last September's number, and a mere 0.1 percent increase for the month.

Economists had been projecting a monthly increase of twice that, at 0.2 percent. The four prior months saw a 0.2 percent increase.

The CPI-W is a subset index of the overall CPI, which tracks prices on food, clothing, housing, fuel, transportation, medical services, and other expenditures.

Households considered in the CPI-W must meet two requirements:

More than half of a household's income must come from clerical or wage-related jobs.
At least one member of the household has to have been employed for at least 37 weeks for the year.

The CPI-W represents 29 percent of the total U.S. population.

Increases in the housing index accounted for half of September's inflation increase, according to analysis from the Bureau of Labor Statistics. The energy index declined, and the food index remained unchanged.

The overall medical index also rose.

Critics fault the use of the CPI-W

Several retiree advocacies are critical of the use of the CPI-W to assess COLA adjustments, arguing that the index does not accurately reflect seniors' cost of living, which is overweighed by medical costs.

The cost of prescription and non-prescription medicine dropped in September. Physician and dental services increased at a faster rate than overall inflation. Overall hospital services dropped, but the cost of in-patient stays increased.

Health insurance costs increased by 1.2 percent in September, a notably brisk rate of inflation.

Actual cost of living increase versus Social Security COLA

About 47.6 million retirees receive Social Security benefits. This year's COLA increase is the largest since 2012, when it was 3.6 percent.

In previous years, the COLAs were largely negated by increases in Medicare Part B premiums, which are deducted from Social Security checks. Medicare premium adjustments will be announced later this fall.

Premiums in Medicare Advantage plans, which are offered through private insurance companies, will drop next year, according to data released by the Center for Medicare and Medicaid Services last month. Average monthly premiums are projected to be $28 in 2019, a 6 percent decrease from this year.

Social Security's COLA increases over the past 18 years have amounted to a 46 percent increase in payments to retirees.

But research from the Senior Citizens League released earlier this year shows seniors' actual cost of living has increased at twice the rate of COLA increases.

The average monthly Medicare Part B premium was $45.50 in 2000. It was $134 in 2018, accounting for a 195 percent increase, according the Senior Citizens League's research.

Instant Insights /

Why Social Security's 2019 COLA will be 2.8 percent

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