10 things you need to know about the Social Security cost-of-living adjustment for 2018

Calendar Icon Updated October 19, 2017
  1. Social Security recipients will get a 2% cost-of-living adjustment (COLA) increase in their benefits for 2018, an amount that is up sharply from the past two years.  Benefit increases will be payable to more than 61 million Social Security beneficiaries in January 2018.  Increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on Dec. 29, 2017.   Some people are eligible and receive both Social Security and SSI benefits.
  2. The average person will get about $25 more each month.  The average monthly Social Security payment is $1,258, or about $15,000 a year.  This is the largest annual increase since 2012 when the COLA was 3.6%.
  3. The maximum benefit for someone who retires at full retirement age in 2018 will be $2,788 per month compared to $2,687 per month this year.
  4. Over the past eight years, the annual COLA has averaged just above 1%, but in the previous decade, it averaged about 3%.  Earlier this year, it was projected that the COLA increase would be 2.2%.  This prediction came after a 0.3% increase in 2017 a 0% increase in 2016
  5. Congress enacted automatic COLA increases for Social Security in 1975. Although presidents sometimes are blamed when increases are small or zero, they have no power to boost the increase, unless Congress can be convinced to change the law.
  6. The COLA is based on a broad measure of consumer prices generated by the Bureau of Labor Statistics Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.  Increases are calculated using the average CPI-W for July, August and September, and comparing it to the same three months from the previous year.
  7. Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax will increase to $128,700 from $127,200. Of the estimated 175 million workers who will pay Social Security taxes in 2018, about 12 million will pay more because of the increase in the taxable maximum.
  8. For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare premiums next year.  That’s because the size of the inflation adjustment also affects how much seniors must pay for Medicare Part B premiums, which are normally deducted from Social Security benefits.  New Medicare premium amounts for 2018 will be announced later this year. 
  9. The good news regarding increased Medicare Part B premiums is that the majority of beneficiaries are protected by a “hold harmless” rule that says the increase in their monthly Medicare Part B premiums cannot exceed the dollar amount increase in their Social Security benefits.
  10. The latest Medicare Trustees report predicts Medicare Part B premiums will remain near this year’s level of $134 per month. Most retirees who enrolled in Medicare before 2016 and who pay an average of $109 per month now could see a sizable jump in their premiums next year to $134 per month.  This will offset much of the increase in their Social Security benefits for 2018, leaving many retirees with virtually no Social Security benefits increase for the third year in a row.  

Eligibility Team

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