WASHINGTON — Oct 13, 2017, 12:44 PM ET

Social Security recipients will see 2 percent boost in 2018

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Millions of Social Security recipients and other retirees will get a 2 percent increase in benefits next year, the largest increase since 2012, thought it comes to only $25 a month for the average beneficiary.

The cost-of-living adjustment, or COLA, affects benefits for more than 70 million U.S. residents, including Social Security recipients, disabled veterans and federal retirees. That's about one in five Americans.

The Social Security Administration announced the COLA Friday.

By law, the COLA is based on a broad measure of consumer prices generated by the Bureau of Labor Statistics. Advocates for seniors claim the inflation index doesn't accurately capture rising prices faced by seniors, especially for health care.

"It doesn't make your life any easier. It's really made it tight," said Barbara Bogart, who retired from a home health care company. "You have to be so careful to make it each month."

Bogart, 75, who lives near Indianapolis, said she gets less than $1,000 a month from Social Security, her only source of income.

"I have all the normal costs that people have. I have groceries, gas for my car," she said. "I have to be cautious."

Some conservatives argue that the inflation index is too generous because when prices go up, people change their buying habits and buy cheaper alternatives.

Consumer prices went up only slightly in the past year despite a recent spike in gasoline prices after a series of hurricanes slowed oil production in the Gulf Coast, said Max Gulker, senior research fellow at the American Institute for Economic Research.

"For the most part, there was a decline in energy prices for a lot of the year," Gulker said. "But at the end of the year we saw that uptick in gas from the hurricanes."

The average monthly Social Security payment is $1,258, or about $15,000 a year.

Congress enacted automatic annual increases for Social Security in 1975. Presidents often get blamed when increases are small or zero. But President Donald Trump has no power to boost the increase, unless he persuades Congress to change the law.

In 2009, President Barack Obama persuaded Congress to approve one-time payments of $250 to Social Security recipients as part an economic stimulus package.

Over the past eight years, the annual COLA has averaged just above 1 percent. In the previous decade, it averaged 3 percent.

Multiple years of small or no COLA reduces the income of retirees for the rest of their lives, said Mary Johnson of The Senior Citizens League.

"Think about the length of a retirement period. Eight years is about a third of a (healthy) retirement," Johnson said. "It's squeezing them. It's causing them to dip into savings more quickly. The lifetime income that they were counting on just isn't there."

The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of consumer prices. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.

The cost of medical care has gone up by 1.5 percent over the past year, according to the September report released Friday. Housing prices are up by 2.8 percent while the cost of food and beverage has gone up by 1.2 percent.

Gasoline prices are up 10 percent from a year ago, according to AAA, though they have dropped in the past month.

The COLA is calculated using the average CPI-W for July, August and September, and comparing it to the same three months from the previous year.

Social Security is financed by a 12.4 percent tax on wages, with half paid by workers and the other half paid by employers. Next year, the maximum amount of earnings subject to the Social Security tax will increase from $127,200 to $128,700.

About 175 million workers pay Social Security taxes. Of those, about 12 million workers will pay more in taxes because of the increase in taxable wages, according to the Social Security Administration.

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  • plankbob

    Trickle-down economics has been a gut punch to the American Dream and a secure retirement.

  • B. Davis

    Only pensions that exist today are usually government. Ironically government jobs were usually exempt from from the same laws. They have been mismanaged by governments when the 2008 financial disaster hit and they kicked the pension funding down the road in order to make up for revenue losses (Illinois). Since most Americans know nothing about investing in the stock market 401(ks) are a treacherous road.

  • B. Davis

    The cost of insurance home, car, property taxes have all increased beyond 2% for the year. Even though gas prices were somewhat lower part of the year it has not been reflected in the price of food etc. Since clerical workers are the lowest paid jobs in the work force and raises are non existent makes you wonder why organizations like AARP are silent and continue to be insurance sales as their primary goal. Each year retirees fall farther behind and one financial increase or price can devastate a retiree.

  • KPE

    "Some conservatives argue that the inflation index is too generous because when prices go up, people change their buying habits and buy cheaper alternatives."

    I wish that the reporter would actually back up a statement like this. What conservatives? Who is he talking about, a friend of his? A relative, perhaps? Nothing but yellow journalism, just an inflammatory statement with nothing to back it up.

  • Sue Sweatt

    The 2% increase would be fine, I guess, as long as WE GET IT. We got a healthy 1% in 2017 only to find out that the cost of Medicare was raised to take back that small contribution and we got NOTHING! SHAME
    .

  • AvJoe

    It has nothing to do with politics. It's just a coincidence that this year the COLA is 2% while it averaged only about 1% from 2009-2016. BTW, the members of the BLS (who all work in the Executive Branch) compute the inflation number.

  • loydfair

    " ........... and you're gonna win win win so much ..... you're gonna say pleas stop
    i don't want to win any more .............." and , as always , MORE TAX CUTS
    FOR THE WEALTHY ........................

  • John Barron

    I do not know why everyone complains about the amount paid by social security, or the cost of healthcare, or even the fact that some politicians seem bent on giving the super wealthy huge, bigly tax breaks. After all, it is your fault you were not born into a wealthy family and did not inherit the family fortune. Let this be a lesson for next time..

    Here is your deserved consolation prize..a roll of paper towels.

    /Sarcasm of course.

  • Bryan Thompson

    "Some conservatives argue that the inflation index is too generous because when prices go up, people change their buying habits and buy cheaper alternatives." Yeah, like instead of buying hamburger, you can get dog food! So sick of these deadly tumors on humanity. I've seen plenty of "liberalism is a mental illness!" from the unhinged, I think its time we set the record straight. Conservatism is one of the signs of a psychopath.

  • mik8888

    I can remember only getting some 2% raises when I was working, and most times it was 0%...so I'm used to it really...

    It just makes it a bit more difficult when you are on a fixed income...

  • chris3dog

    Republicans have been working to repeal Social Security since 1935!

  • Been Around

    Why not raise Social Security the same percentage our politicians get?

  • Johnnie Polk

    What this article fails to mention is the increased medicare premiums for most retirees will eat all but a few dollars of next year's raise.

  • 40words

    What little they may add to that is for the short term only. And at the same time, Medicare & Medicaid benefits continue to be dropped.

    With the age of our general population, people should be extremely concerned about Medicaid benefits being dropped because that is a primary source of care/living for a very large % of our elderly population and has been trending in that direction for years now (doesn't matter if you are in a red state or blue state - it is all trending in that direction).

    Without those benefits, who will pay for your elderly relatives' (or your) care? You - out of pocket, at a massive cost.

    And with the sheer # of elderly needing that type of care, what does that do to our overall economy (not to mention your own personal savings) --- it tanks it.

  • Joe Mac Pherson

    I haven't seen an actual increase in my Social Security income since 2015. This year, when I truly anticipated a better change, I was astonished to learn I'd receive no raise at all. When I inquired about the matter, I was told, because my medications have gone up in price, my raise is equal to the price factor, thus my income won't change. My rent went up, gasoline went up, groceries cost more, and still I earn what I was taking home in 2015, 2016. I hope I actually see a positive difference in my income next year!!

  • Lanny Ellison

    Last year's SS increase was offset by an increase to Medicare monthly payment ... to the penny, BTW. Whoopie as this will probably occur again!

  • Arryandan

    It needs to get back where it is supposed to be. 2.8 Trillion dollars was stolen by the government, if it were back, where it belongs, the benefits would be enough for retirement (without living below the poverty level).

  • Andy1

    Don't spend it all in one place.

  • morty harenza

    Why didn't ABC just wait a few hours until the actual percentage was released?

  • Bud Simpson

    "Some conservatives argue that the inflation index is too generous because when prices go up, people change their buying habits and buy cheaper alternatives."

    Which just proves that, "some conservatives" are a lot more stupid than the just plain old dumb conservatives.

  • SGNH

    " when prices go up, people change their buying habits and buy cheaper alternatives." Until they've maxed out all those cheaper alternatives

  • Propilotone

    That is not really much of an increase. I am not relying on future social security dollars in my retirement projections, I maxed out my 401k contributions over the last years, have been doing international consulting and contracting services which don't have a reportable income, have been doing charter flying off and on for the last two decades which only report a certain amount. Have been growing my real estate portfolio as well as getting set up with annuities and investing in shell corporations.

  • jared

    Obama offered to cut the COLA as a way to fix SS. But since it is so low anyway, cutting. It is not going to save much.