Social Security cards (Photo:Shutterstock)

|

When the government announces the cost-of-living adjustment for Social Securitybenefits next month, the increase will be at or near1.6%, according to The Senior Citizens League.

|

A 1.6% COLA would be sharply below this year's 2.8% and thesmallest hike since 2017. The estimated change would boost theaverage retiree benefit by $23, almost half the $39increase last year, to $1,484. It would also eat up close to 40% ofthe almost $9 increase in Medicare Part B premiums that theMedicare Trustees Report preliminarily estimated in April.

|

The Social Security Administration and the Center for Medicareand Medicaid Services (CMS) are expected to announce the officialincreases in the Social Security COLA and Medicare Part B premiumin less than a month.

|

The Social Security COLA is based on the change in the ConsumerPrice Index for Urban Wage Earners and Clerical Workers (CPI-W),between the third quarter of 2018 and third quarter of 2019. Todate, the government has data on 11 of the 12 months used in theCOLA calculation. The September data, which is the missing month,is set to be released on Oct. 12.

|

Mary Johnson, the Social Security policy analyst at The SeniorCitizens League who conceived the latest COLA estimate, based theprojection on existing CPI data plus an extrapolation for theSeptember data which, in turn, is based on historical averagemonthly increases.

|

"If premiums rise by $8.80 or more [her estimate for theMedicare Part B increase] and if the cost-of-living adjustment(COLA) is 1.6% as we estimate, then Social Security recipients withbenefits of about $550 or less are at risk of seeing the Part Bpremiums take the entire COLA, leaving nothing extra to deal withother rising costs," said Johnson in a statement.

|

Recipients who collect more than $550 a month in benefits willhave roughly $15 of the increase left after paying their MedicarePart B premium to cover all other costs, including high Medicaresupplemental and prescription drug premium and out-of-pocket costs,according to The League.

|

Over the long term, the Social Security COLA has not kept upwith the rising cost of living for citizens. A report by The SeniorCitizens League earlier this year found that recipients lost 33% oftheir buying power between 2000 and 2019.

|

The League, along with the Alliance for Retired Americans andthe National Committee to Preserve Social Security and Medicare,has been recommending that the Social Security COLA be based on theConsumer Price Index for the Elderly (CPI-E), because CPI-Eprovides a more accurate measure of the rising prices for theproducts and services that senior consume such as prescriptiondrugs.

|

The Social Security 2100 Act, which has more than 200 Housesponsors, and the Fair COLA for Seniors would both link the SocialSecurity COLA to the CPI-E, but neither bill has advanced inCongress. READ MORE:

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Bernice Napach

Bernice Napach is a senior writer at ThinkAdvisor covering financial markets and asset managers, robo-advisors, college planning and retirement issues. She has worked at Yahoo Finance, Bloomberg TV, CNBC, Reuters, Investor's Business Daily and The Bond Buyer and has written articles for The New York Times, TheStreet.com, The Star-Ledger, The Record, Variety and Worth magazine. Bernice has a Bachelor of Science in Social Welfare from SUNY at Stony Brook.