Rising Interest Rates Mean Social Security Checks Will Increase by 2.8% in 2019
The average beneficiary's check will increase by about $39 per month to about $1,461
For many people, rising interest rates don't sound very good. But if you're a retiree collecting Social Security income, it can be a good thing. Thanks to a rising cost-of-living, the Social Security Administration has announced that Social Security checks are getting an adjustment for 2019, rising about 2.8%.
Each year the Social Security Administration makes an assessment using the Consumer Price Index for Urban Wage Earners and Clerical Workers from the Bureau of Labor Statistics to determine the necessity of an adjustment to benefits. This index measures yearly price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.
Increases aren't always a sure thing
Even though most beneficiaries will say that an adjustment is needed and should be hefty, increases don't always happen. In fact, there was no cost-of-living adjustment for 2010, 2011 and 2016. The largest increases were in 1981, which saw a 14.3% rise, and in 1982, which saw an 11.2% rise.
the average impact
The average beneficiary's check will increase by about $39 per month to about $1,461. The current maximum benefit for someone who retires at full retirement age, which us 66 for those born from 1943 through 1954, will increase by about $78 per month to about $2,866. This will impact about 67 million Social Security and Supplemental Security Income beneficiaries.
Increase Doesn't Necessarily Increase Buying Power
The increase in the checks will be the largest since 2012, when payments increased by 3.6%. According to some groups, the increase in payments for 2019 won't be enough to make up for lost consumer buying power that Social Security Benefits have lost over the past two decades due to unstable prices and higher costs. An increase in the cost-of-living does cause the amount of the checks to increase, but consumers aren't really getting more buying power. Their buying power is just catching up to the market, which has sometimes been turbulent. It can sometimes take a while for checks to catch up with market changes, which leaves older consumers, who often rely on these checks for all of their expenses, short-changed.
Higher Health Care and other Costs Offset Adjustment
Medicare Part B premiums for 2019 have not been announced yet, but they are expected to increase. Cost-of-living adjustments to Social Security have typically been offset by higher Medicare premiums and other health care costs in the past. Many medical costs are expected to increase in 2019, from Medigap insurance to prescription drug coverage, which could eat up the entire cost-of-living increase.
But health care costs aren't the only thing that goes up. Most consumers who rely on these payments for everything from groceries to rent will tell you that their costs are always increasing, which leaves them looking for places to cut expenses.
New Price Index Needed for Older Consumers Needed?
The cost-of-living adjustment is required by law, but many senior citizen advocates say that the price index used to calculate the Social Security increases don't reflect the rising prices older consumers face. Older consumers spend money in categories, such as medical expenses, that can increase in cost at a rate higher than inflation.
2019 Benefit Increases
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The new rates for Supplemental Security Income will go in effect on December 31, 2018 and on January 1, 2019 for Social Security.