[Updated on October 11, 2018.]
The official announcement for 2019 Social Security cost of living adjustment (COLA) came out. The COLA in 2019 will be larger than in 2018, but it’s actually bad news.
Social Security COLA goes by the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Based on changes in CPI-W, the COLA will be 2.8% in 2019 versus 2.0% in 2018. For those who are still working, the maximum earnings subject to Social Security tax will increase by 3.5% to $132,900 in 2019.
While we are at it, I’d like to re-address a few common myths about the Social Security COLA.
Myth No. 1: The President or Congress sets the Social Security COLA
Some mistakenly think that the Social Security COLA is given arbitrarily by the President or Congress, and they want their elected officials to take care of the seniors by declaring a higher COLA. That’s not the case.
The calculation is automatic. It goes strictly by the inflation numbers. You get a higher COLA only if the inflation numbers are higher. How the COLA is calculated is written into the law many years ago. The current President and Congress don’t control the results.
Myth No. 2: Retirees should want a higher Social Security COLA
Intuitively people want a higher COLA. However, a higher COLA caused by a higher inflation does no good. When there is a higher inflation, even though your Social Security benefits get a bump, your other money will lose more value. Contrary to intuition and many people’s belief, you want a lower COLA. A lower COLA means lower inflation, which means lower expenses for retirees, which makes your savings outside Social Security last longer.
Some say the government deliberately under-reports inflation. Even if that’s the case, you still want a lower COLA.
Suppose the true inflation for seniors is 5% higher than the reported inflation. If you get a 1% COLA when the true inflation is 6% and you get a 3% COLA when the true inflation is 8%, you are much better off with a lower 1% COLA together with 6% inflation than getting a 3% COLA together with 8% inflation. In that case your Social Security checks lags inflation by 5% either way, but you’d rather your other money outside Social Security lose to 6% inflation than losing to 8% inflation. Your savings last longer with lower inflation.
Pray for lower inflation if you are retired.
Myth No. 3: A larger increase in Medicare Part B premium means there is no COLA
Sometimes there is an increase in Medicare Part B premium such that it completely offsets the Social Security COLA. Although there is no net increase in the amount people receive, there is still a COLA. Medicare Part B premium increases when the costs to cover the retirees’ medical expenses increase. Medicare Part B premiums only pay a small fraction of the total cost. Medical costs can increase faster than the general cost of living, especially for retirees.
Deducting the Medicare Part B premium from the Social Security check is only for efficient administration. If people pay Medicare Part B premium separately, it’s easy to see there’s COLA, then there’s an increase in medical cost. The existence of one does not deny the existence of the other. In order to preserve the COLA, one can always dis-enroll from Medicare Part B, but that wouldn’t be wise.
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For us working folks you may be interested in the following article. There are reports that Social Security wage tax could increase to $126K for 2017…
Harry Sit says
The Social Security wage base increases by the National Average Wage Index, which comes out with a 2-year lag. Wages increase faster than inflation. Previous change in the wage base was +3.5%. If we simply go by that it will be like $122-123k in 2017.
Harry Sit says
Actually Social Security wage base wasn’t allowed to increase in 2016 because there was no COLA in 2016. It will catch up in 2017. If we add 3.5% on top of 3.5%, it will be $127,000 in 2017.
Harry Sit says
Social Security press release confirmed the COLA will be 0.3% in 2017 and the wage based will be $127,200, up 7.3% with two years worth of average wage index increases rolled into one.
Paul J Hamilton says
Here is another instance of the government urinating on our legs and telling us it’s rain.
louis c says
How so? What are you referring to?
Thats the dang truth. SS recipients need a big raise. I invite the government to go with me to the grocery store, buying my meds, paying for health insurance, needing to purchase big items like a car…even a used car.
Social security doesn’t include food and housing costs? Why not?
Harry Sit says
It includes both food and housing.
“What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners’ equivalent rent, fuel oil, bedroom furniture)
APPAREL (men’s shirts and sweaters, women’s dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians’ services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).”
A 0.3% increase in Social Security and some are estimated a 20% increase in Medicare B. Another hit for retirees.
It’s a slap in the face. Especially when they are giving food stamps and a check to people living here in America that are not citizens of our country!
Non-citizens are not eligible for food stamps. However, children born in the US are citizens even if they are born to non-citizens (why this is still the law is beyond me) – those children can get food stamps because they are citizens.
Harry Sit says
Marc – See Birthright citizenship in the United States.
“Both Democrats and Republicans have introduced legislation aimed at narrowing the application of the Citizenship Clause. In 1993, Sen. Harry Reid (D-Nev.) introduced legislation that would limit birthright citizenship to the children of U.S. citizens and legally resident aliens, and similar bills have been introduced by other legislators in every Congress since.”
Kenneth Gates says
If they could let some of us that are the same age as Trump go back to work without wage income restrictions that could help some of us that are only getting 750 a month.
Kenneth Gates what are the restrictions to going back to work at the age of Trump?
Millennial Moola says
From all the financial surveys I see there are a scary number of seniors with so few assets that they dont care about anything but how much social security is going to be
R Roberts says
What happened to the $2.5 Trillion borrowed from Social Security by Bill Clinton to show a balanced budget during his 2nd term? When does that get repaid to Social Security?
Harry Sit says
The Social Security trust fund had a surplus since 1984 and it had lent the surplus to the federal government since then (bought Treasury bonds), not just during Bill Clinton years. Lately it’s spending some of the interest it earns on those bonds. According to this report the trust fund will start redeeming some of those bonds in 2020, until all the bonds are redeemed by 2032.
Who figures out the math ,when it comes time for an increase. We are just suckers in a game for the polications.
The Social Security Administration does. But it is formula driven (set in law) and not subject to any politicians. Social Security payments are not political at all, simply driven by your earnings and the CPI is driven by collected statistics on prices from the Department of Labor. It is all math, no politics.
There is an old saying : “figures don’t lie , but liars sure can figure.” 1st , it is our money , my money I slaved for since 1966 and who was given the right to take our money and get to” play” with our money as they see fit ? seems we all are the govts bastard nigger slaves since our birth . and this isn’t meant as a racial thing . it is how our elected / appointed officials perceive us us who keeps the lights on
Paul J Hamilton says
If they would quit giving our money to foreign governments, illegal aliens, the IWW people (I won’t work), then they could recalculate the COLA and give more to the ones who deserve it.
Charles Myers says
Apparently you didn’t read the article. What the government pays to other groups doesn’t affect the COLA. If the government had a surplus, it wouldn’t affect the COLA. Politicians don’t set the COLA. The cost of living index is what affects the COLA. Its automatic. I agree with the article’s statement that a low cola or no cola is actually better. Last year the cost of living went down but your social security payments stayed the same. This means your spending power actually went up. That’s always a good thing.
jerry h. says
We have not received a COLA raise to amount to anything since udumbo took office as president. That is because a new system has gone into effect on how to calculate COLA Everyone is getting raise, quite handsome for some people. Maybe social security recipients don’t need raises but COLA we do need. You CANNOT SET THERE AND TELL ME THE COST OF LIVING HAS NOT GONE UP. IF YOU CAN YOU ARE LYING TO YOURSELF AND EVERYONE ELSE.
Simply not true. The President (nor Congress) sets the COLA (or for that matter Social Security payments – that is formula driven based on your wages (or you and your spouses wages – if you are collecting spousal benefits).
The CPI is a reasonable measure of inflation, but it is not perfect. MIT’s Billion Prices Project shows a clear relationship with the CPI.
But individuals experience different measures of inflation. CPI is an average, not the highest. For example, personally my expenses have gone down this. Biggest changes are new house and mortgage, which are bigger, but my daughter entered Kindergarten and my child care costs overall have decreased. The net is a small decrease to my expenses.
jerry h. says
BS. The politicians are the ones that set what the CPI uses for the formula to arrive at their figures.
jerry h. says
Sounds to me that u all live in the part of the country where wages are high. You should live where people live in reality. The prices for everything is close to the price you pay, sometimes higher. So this stinking so called raise we are getting in COLA really does not amount to anything. The only thing is the prices will make another jump. I retired from the Military where we were supposed to get free medical upon retirement. Another LIE from our government. I pay a little over $3025.00 a year for medicare. I have to pay that in order for my insurance I get for retiring from the Military is any good, whether I use it or not. people retiring from civilian life in jobs make a lot more a month that people retiring from the Military. COLA is definitely needed for people in this situation. I feel sorry for you people making $150,000.00 a year. YEA RIGHT. If I made that much I would be on easy street. At least I have Military retirement, not just social security like a lot of folks. So don’t try and make me feel sorry for you people making $120 – $150,000.00 per year.
Armand Tom says
Retired for 15 years on CSRS (we get the same raise or not raise as SS retirees) My rent has gone up 3% every year the past 6 years, my utilities have gone up 3% every year the past 6 years, my car insurance has gone up 3% every year the past 6 years, by heath insurance premiums have gone up 2% a year the past 6 years, WTF? Now I am working a part time job 15 hours a week for minimum wage and can’t get more hours because the employers don’t want any full time workers because of paying benefits. WTF? I had to move to a cheaper apartment development and get a part time job to make ends meet even after being retired for 15 years. I am over 70 and it’s getting really difficult. I never can eat out again at a restaurant or play golf, or take a vacation, or give out Christmas presents. I live in the dark mostly and use the heat sparingly, only wash clothes sparingly, never go to the movies, think about any utility charges I am incurring throughout the day. WTF? When will the seniors or AARP revolt on our behalf? Can’t afford life insurance, so I signed papers to have my by body donated to science when I die to avoid funeral or cremation fees to be paid by my children. I think the population percentage of older people over 65 is getting higher by the year and no politician cares because, DO YOU KNOW ANY POOR POLITICIANS THAT HAVE TO WATCH THEIR DAILY EXPENSES LIKE WE DO? The answer is no. Every politician has a house or 2 or 3 or more and a substantial retirement coming. Why would they bother with the 30+% (of the population) of older Americans who struggle with everyday living? Where is AARP? No lobby? By the way, my minimum wage part time job is driving the elderly around to senior facilities and medical appointments. I drive them to and from their homes. THEY ALL LIVE IN THEIR CHILDREN’S HOMES. My children have offered to let me live with them for free but would involve uprooting where I have lived the past 30 years with area friends and convenience. It is very difficult to relocate after so many years and contacts and routines at an older age, and my mind is still sharp and health okay. It would be like going to a different planet and not knowing anyone. That is something that probably would destroy my incentive to wake up every day with no friends and nothing to look forward to. I, also would become a vegetable, with no local acquaintances and nothing to do on a daily basis and then become older than my years very quickly and lose the will to live. I guess I will surrender. My only companionship will soon be television and internet, and no humans except my children.
That’s why you need to boycott AARP I am part of a movement called “ssfairness.com.” If you are affected by the WEP / GPO (if you know what that is), then you need to boycott AARP.
I worked 21 years under Social Security, widow. Supposed to get $940.00 per month from them — getting $576.00. WTF, right?
jerry h. says
I hear where u are coming from, yet the politicians or the so called formula that is used to set COLA says the cost of living has not gone up. These people simply do not live in reality. Companies around here are giving their employees raises, at least 3% for most, some as high as 5%. Everything goes up, except SS or Military retirees,or the like. Medicare payments are sky high, medical is sky high, prescriptions are sky high, gas is going up, everything is getting higher except, you know what. Politicians are are getting raises, because they cannot make it on their wages. My gosh, they have it made, everything given to them, get paid for just about everything they do. Oh well!!!
I am sorry Harry, it seems that your blog is under the attack of COLA gripers and people who cannot deal with rational facts and consequences of life time of decisions. I want to let you know how much I appreciate your simple style of explaining how financial systems work for individuals. It has helped me immensely over the past decade to make better choices with my money and how I earn it, save it, and invest it and has set me up on a strong foundation towards financial independence. Thank you very much.
Harry Sit says
Thank you KD. Indirectly we are learning we must not make our financial well-being depend on the Social Security COLA.
Deanna Smith says
Listening to all these comments. You must realize that it is mostly WOMEN that are affected — widowed women, single mothers — who didn’t have the luxury of going to college at whim, but who nonetheless worked their $%^^ off!! Now, in OUR golden years, we are getting screwed not only by Social Security, but by the WEP (Windfall Elimination Provision, which incurs a loss of $418.00 per month in 2017) and GPO (Government Pension Offset) which can cost an insured woman as much as $1,200 a month or more. Talk about robbing us blind. We are talking about women who have earned their money and paid into the system, as have their deceased spouses. Would you like to help? Please contact us at roxiepet1234 at att.net to follow our battle in the California Supreme Court after 33 years of this egregious Ronald Reagan law. Kevin Brady promised repeal with H.R. 711. FOR THOSE OF YOU IN TEXAS, HE IS A LIAR……HIS WEP RECALCULATED FORMULA WAS ONLY FOR RETIREES IN 2026 AND BEYOND. DON’T VOTE FOR THIS CHARLATAN IN ELECTION YEAR….TELL YOUR FRIENDS.
As to the Democrats — why would any senior, black or white, NOT take their chance on Donald Trump? How can he be any worse. We have not received a decent COLA in over 5 years.
A Social Security check is not a paycheck, and COLA is not a raise. COLA is just form of an adjustment to prior wage history, similar to wage indexing. In fact, persons over 62 not even collecting a benefit check are also affected by COLA increases.
Roosevelt’s vision for Social Security was precisely a system independent from political influence, and the subsequent implementation of COLA hews to that vision. Social Security is no magical hedge fund that can draw funds from elsewhere, it is entirely funded by its future beneficiaries through employment taxes. It cannot survive if most believe they can/should get more out of it than they paid in. As it happens, I received my first SS benefit check deposit this morning, and it’s 65% larger than average. But that also means I paid in more than the average beneficiary. In fact, I paid in greater than 65% above average. That is the “social” part of Social Security, and I have no problem with it. Chances are I won’t live long enough to collect most of what I paid in, when people who get smaller checks certainly will.
To paraphrase the famous economist, inflation is always and everywhere a personal phenomenon. No one-size-fits-all number can be appropriate to everyone, or even anyone. My single greatest expense is property tax, and it has always exceeded CPI. I don’t ask for special dispensation, and larger check, as a consequence.
Social Security is a good, equitable system, even if it doesn’t allow you to live in the style you would like. Keep your uninformed opinions away from my check.
Social Security was supposed to be a social safety net, it isn’t. I worked, I paid my premiums, I continued to work even after I became sick until I was fired from one too many jobs after being in the emergency room or the hospital causing me to miss work. (Yes your boss can fire you for being sick.) I spent all of my savings, my 401-k, my pension and filed bankrupty on the rest of my medical bills, before Medicaid would help due to the 3 year wait for a SS disability hearing. My medicine co-pays have gone up, my utilities have gone up, my taxes have gone up, maintenance on my car has gone up. I can’t afford dental care, new glasses, hearing aids, regular haircuts or new clothes. On SSDI, I began living close to poverty a few years ago so Extra Help pays my Medicare premium now and I qualify for Medicaid’s medically needy program in my state. I also qualified for $16/month in food stamps this past year. How is it possible that I keep sinking lower financially (% of poverty) on disability if the SS COLA is actually keeping up with inflation?
A VERY POOR JERK says
How am i going to pay for my servants, BMW, yacht, and my mansions, and all of my mistresses on a $0.2 % increase, How dare they cut my allowance, OPP’S another bad dream again.
Let’s be honest about it, no Social Security beneficiary is going to be happy about the CPI or annual COLA no matter how much it is. The Federal government should stop playing games and tell beneficiary recipients to plan on Zero increases throughout your lifetime when you sign up to receive Social Security. The government is better off helping us with IRA and 401k support in retirement years.
John aron says
Congress demorats GOP and Regan Clinton and obama stole my Social Security 25% less now at age 62 ! I paid I want my money ! No money to foreign people or governments! I want my 25 % back and a 6 % cola ! Just look it up if you did not live that long ! Also everyone does not live long that is a big lie ! Everyone that I know has died before they got to age 65 but about 3 people!!
well I am very Glade that I get SOCIAL SECURITY But every one’s is right I am so mad at the way people of the world act when they Don’t want to go out and get a Job I mean I had Gotten My SSI in 1992 and I was great full but when the U.S. spends Billions of people Tax Dollars on waste full spending it’s a Dame shame I have nothing hateful against Mexican’s the hard working people But the problem’s with the U.S. Government they will let any one come in this Country and that’s not right I thing that all of the she go into the ARM FORCES all 12 Million of them or pay Higher Taxes I see so many people in life Don’t want to get off their ASS and get a Dame Job so they think if they can go Down to a SOCIAL SECURITY OFFICE and play Crazy like 70 percent of people do I think that we need I think it’s time for Congress to have it chance  split the $ in half  half of Americans get their full Amount that they work for  and the other half like people who don’t work get health care but work a Full Time Job that way all lazy people will have no choice but to get off their lazy ASS and work in order to keep their health care  and as for food stamp’s program I think that people who can work a full time Job Doesn’t need food stamps at all and that’s one of the problems that we all have to Deal with I think that it’s time for all American’s tune to GOD and then they will see a BIG Difference in life and the way people have been treated in life I would say it’s time for people to stop thinking about all of the bad thing’s in the world and turn our lives over to GOD and to be better people in GOD’S EYES.
Tammy Pitcher says
I am receiving my husbands SS for about 5 years now, I have an anger that the government has put the VA and SS in the same categories as far as COLA raises go. When we have had fighting men and women that have died for this country for years and may have become disabled in the process and they put the raises in with the same as getting old?!! What kind of crap is that?
When I first filed for my husbands SS, MEDICARE of course tried to take monies out to pay for their insurance, I didn’t need it then because I still have my VA health care to fall back on. Then MEDICARE said something about that i’ll be penalized when I am ready to apply for it? Why should I have to pay for something I don’t need yet?
Bill Carson says
Propaganda the government does set the cola they just lie about it . They change numbers the way they want . No more foreign aid. No more foreign immigrants . No more lying propaganda about Americans living longer . The social security cola was is a insult to the America people when obama was President . 4 years no cola that cola 0.3 was a insult so that is why I say 4 years . Gas prices were very high to pay for there bridges that that Americans made fall down. Go President Trump. We want our 25% reduced rate for taking social security at age 62 . Also talking it will let the young get a job . Look at what NAFTA did to Americans and company’s. Americans want a very big cola in 2019 . Americans for Americans. Make America great again .America will be working again . So stop the stupid lying propaganda about social security money.
Richard Anselmo says
Does the COLA get applied to those who are not yet receiving Soc Security?
(I have filed and suspended but am delaying to age 70)
Harry Sit says
It does. The COLA and the delay credit are applied on top of each other.
Tammy Pitcher says
At the present time I am 60 years old and am receiving the widows benefit from my deceased husband of 7 years now. My SS statement says what my amount will be when I turn 70. I too will be holding off till age 70 if I make it that long…
I am retired, receiving pension and disability, ssd. We all paid in during our working years. After receiving Medicare by force, I could no longer use manufacturers discount cards or coupons to reduce costs for medications. Yet we are still paying high premiums, taxes, copy’s, etc. the raises are small that we do get and medical costs con sums those raises every year. So, we all don’t care what anybody says, the raises don’t keep up with medical rate hikes…let alone everything else. And why is rents so high causing more problems having a place to live? Oh, I worked 40 years, paid everything into our system and can’t use a discount card for medications….shameful.
Kenneth Gates says
They keep saying how great everything is with the economy if you are on social security and getting half of what they say is the normal its real bad for us ,if they would let you go back to work without all these restrictions ,I could work half time,and that woild sure help.
Martha Haug says
I started on SSDI very early because of illness. I really would love to see social security remove income limits on trying to work. I know I am in and out of the hospital. However, I love working. It gives me a purpose. I could at least use my education to try working from home. I feel if I use their ticket thing, I will be determined able and suffer loss of my medical care. I can not afford to loose that because I am sick a lot. A lady at their office advised me against it for that very reason.
I am just above their limits on the savings program. So, I can’t even save. I live in poverty while I am sick. My health is determined not to improve any time soon, and I am so limited by social security to even try having purpose or savings.
I understand already politics does not determine the cola. It is determined by inflation. Can you explain again why it does not line up with the actual cost of living in real life?