Retirees who are collecting Social Security retirement benefits have reason to cheer: Your Social Security checks will be larger next year.
The Social Security Administration announced that the cost-of-living adjustment for 2019 will be 2.8 percent.
That is in line with the 2.8 percent increase the Senior Citizens League, a nonpartisan organization, predicted last month.
Each year, the Social Security Administration assesses whether there should be an adjustment to benefits, so that their purchasing power keeps up with inflation. The agency uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, CPI-W, from the Bureau of Labor Statistics.
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This year's increase marks the biggest hike since 2012, when the cost-of-living adjustment was 3.6 percent.
Retirees do not always get a raise. In 2016, 2011 and 2010 the cost-of-living adjustment was zero.
Social Security cost-of-living adjustments in the past decade Year Cost-of-living adjustment 2018 2.00% 2017 0.30% 2016 0.00% 2015 1.70% 2014 1.50% 2013 1.70% 2012 3.60% 2011 0.00% 2010 0.00% 2009 5.80% 2008 2.30% Source: Social Security Administration
For retirees who have recently elected to take Social Security benefits, this could be the first time they see a "real increase" in their monthly checks, Joe Elsasser, president of Covisum, a provider of Social Security timing software, previously told CNBC.
For those who are collecting an average Social Security benefit of about $1,400, the 2019 cost-of-living adjustment will amount to an extra $39 per month.
The Medicare Part B premiums for next year have not been announced yet. Estimates peg those premiums at $135.50 in 2019 for those with incomes below $85,000.
In the past the boost from the Social Security cost-of-living adjustment has been eaten up for many by higher Medicare premiums.
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That is unlikely to happen to as many people this year as it did in 2018, according to Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.
Individuals with Social Security benefits from around $600 to $634 could be most affected.
"That group will likely see their Part B premium take up their entire COLA in 2019," Johnson said.
The number of Social Security beneficiaries with benefits in that range is about 5 million, according to Johnson, though not all of those individuals are necessarily enrolled in Medicare.
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The boost that Social Security benefits see in 2019 will not make up for the buying power benefits have lost over the years.
"Even though we're having the highest COLA since 2012, I think people still express frustration because their costs are still increasing faster," Johnson said.
Social Security benefits have lost 34 percent of their buying power since 2000, according to a study released by the Senior Citizens League in June. While benefits have increased by 46 percent through cost-of-living increases since 2000, senior expenses have risen 96.3 percent, according to the nonpartisan senior group.
Fastest-growing senior costs since 2000 Item Average cost in 2000 Average cost in 2018 Percent increase Medicare Part B monthly premium $45.50 $134.00 195% Prescription drugs (Annual average out-of-pocket) $1,102.00 $3,172.72 188% Home heating oil (gal.) $1.15 $3.22 181% Homeowner's insurance (annual) $508.00 $1,342.05 164% Medigap $119.00 $306.64 158% Propane gas (gal.) $1.01 $2.60 157% Real estate taxes $690.00 $1,579.06 129% Total medical out-of-pocket expenses (National average, age 65 and up) $6,140.00 $13,304.00 117% Oranges (lb.) $0.61 $1.33 117% Source: Senior Citizens League
Retirees are spending more of their Social Security benefits on health-care costs, according to separate research from the Senior Citizens League released in August.
Medicare premiums and out-of-pocket spending took up one third to one half of Social Security benefits for about 30 percent of retirees, the research found.
