social security

The Incredible Shrinking 2% Social Security COLA

Monthly benefits will increase, on average, $27 in 2018. Or will they?

Drumroll please. The Social Security Administration today announced that 61 million beneficiaries will receive a 2% cost of living adjustment (COLA) starting with benefits paid in January 2018. That's music to the ears of seniors who got a skimpy 0.3% hike at the beginning of this year, after being stiffed with no COLA at all in 2016. Next year's 2% hike, which is based on inflation as measured by the consumer price index, is the largest since a 3.6% increase in 2011.

Social Security says the average benefit will rise by $27 a month.

But don't start feeling like the drum major at the head of a parade just yet. Come January, you'll more likely feel like the guy sweeping up at the end.

There's a good chance that most, if not all, of the increase will be spirited away to cover higher Medicare premiums before it ever makes its way into the automatic deposit into your bank account. Part of the blame goes to a rule that's actually designed to help beneficiaries, and successfully has been doing just that for the past few years.

The "hold harmless" provision prevents Medicare Part B premiums, which in most cases are deducted from Social Security benefits, from rising by more dollars than benefits do. So, when COLAs are small or nonexistent, premiums can't rise as fast as they should to keep pace with rising medical costs. The provision covers most beneficiaries, except first-time enrollees, those who don't have premiums deducted from benefits (because they haven't begun receiving benefits) and those subject to high-income premium surcharges.

Most Popular

Refunds for $10,200 Unemployment Tax Break to Begin This Week
Coronavirus and Your Money

Refunds for $10,200 Unemployment Tax Break to Begin This Week

The IRS will start issuing automatic refunds in mid-May to people eligible for the unemployment benefit tax exemption.
May 14, 2021
18 Worst Things to Buy at Dollar Stores
spending

18 Worst Things to Buy at Dollar Stores

These discount retailers stock plenty of bargains, but some of the merchandise isn’t worth the buck.
May 14, 2021
Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How
social security

Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How

It’s always smart to maximize your Social Security benefits, and if you are divorced, one way to do that might be to take them based on your ex’s earn…
May 13, 2021

Recommended

14 Social Security Tasks You Can Do Online
retirement

14 Social Security Tasks You Can Do Online

Why visit a government office to get your Social Security business done? You can do much of that online.
April 2, 2021
Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How
social security

Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How

It’s always smart to maximize your Social Security benefits, and if you are divorced, one way to do that might be to take them based on your ex’s earn…
May 13, 2021
Updated Exclusive Social Security Benefits Forecast: COLA Likely to Jump to 4.5% in 2022
Economic Forecasts

Updated Exclusive Social Security Benefits Forecast: COLA Likely to Jump to 4.5% in 2022

This would be the largest cost-of-living adjustment for Social Security benefits since 2008.
May 12, 2021
13 States That Tax Social Security Benefits
social security

13 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on…
May 11, 2021