Final word on Social Security COLA and Medicare premiums for 2018

Millicent Graves will get a raise from Social Security next year, but her household budget will get worse, not better.

The 2 percent cost-of-living adjustment (COLA) announced by Social Security for 2018 last month will boost Graves’ monthly benefit by $20.70. But in reality, that increase will be wiped out by a higher Medicare Part B premium, which will be deducted from her Social Security benefit.

The federal government announced last Friday that the standard Part B premium will be $134 per month next year, unchanged from 2017. That sounds like good news at first blush. But for roughly 70 percent of seniors, Social Security benefit amounts will stay flat due to the relationship between the premium and the Social Security cost-of-living adjustment.

Graves is 73 and lives near Williamsburg, Virginia. Her Social Security benefit – a little less than $1,000 after Medicare Part B is deducted – provides roughly half of her total income. The rest comes from retirement savings, which she will use to close the budget gaps next year. “It is frustrating, but I’m lucky in that I can handle it. I know plenty of other people who are living just on Social Security, and it will be hard for them to get by.”

COLAs are determined by an automatic formula tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). From 2013 to 2015, the annual increases ranged around 1.5 percent. No COLA at all was awarded in 2016; this year, the adjustment was a paltry 0.3 percent.

For most beneficiaries, Medicare Part B premiums are deducted from Social Security. The impact of the Part B premium on net benefits next year will vary due to what is known as the “hold harmless” provision governing Social Security.

Learn more at Reuters Money.

 

Speak Your Mind

*