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When the government announces the cost-of-living adjustment for Social Security benefits next month, the increase will be at or near 1.6%, according to The Senior Citizens League.
A 1.6% COLA would be sharply below this year's 2.8% and the smallest hike since 2017. The estimated change would boost the average retiree benefit by $23, almost half the $39 increase last year, to $1,484. It would also eat up close to 40% of the almost $9 increase in Medicare Part B premiums that the Medicare Trustees Report preliminarily estimated in April.
The Social Security Administration and the Center for Medicare and Medicaid Services (CMS) are expected to announce the official increases in the Social Security COLA and Medicare Part B premium in less than a month.
The Social Security COLA is based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), between the third quarter of 2018 and third quarter of 2019. To date, the government has data on 11 of the 12 months used in the COLA 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 Senior Citizens League who conceived the latest COLA estimate, based the projection on existing CPI data plus an extrapolation for the September data which, in turn, is based on historical average monthly increases.
"If premiums rise by $8.80 or more [her estimate for the Medicare Part B increase] and if the cost-of-living adjustment (COLA) is 1.6% as we estimate, then Social Security recipients with benefits of about $550 or less are at risk of seeing the Part B premiums take the entire COLA, leaving nothing extra to deal with other rising costs," said Johnson in a statement.
Recipients who collect more than $550 a month in benefits will have roughly $15 of the increase left after paying their Medicare Part B premium to cover all other costs, including high Medicare supplemental and prescription drug premium and out-of-pocket costs, according to The League.
Over the long term, the Social Security COLA has not kept up with the rising cost of living for citizens. A report by The Senior Citizens League earlier this year found that recipients lost 33% of their buying power between 2000 and 2019.
The League, along with the Alliance for Retired Americans and the National Committee to Preserve Social Security and Medicare, has been recommending that the Social Security COLA be based on the Consumer Price Index for the Elderly (CPI-E), because CPI-E provides a more accurate measure of the rising prices for the products and services that senior consume such as prescription drugs.
The Social Security 2100 Act, which has more than 200 House sponsors, and the Fair COLA for Seniors would both link the Social Security COLA to the CPI-E, but neither bill has advanced in Congress. READ MORE:
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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.
