The Cost of Living Adjustment (COLA) will be 2% in 2018 which is the first substantial increase in years. However, it is a bit below the 2.2% cost-of-living increase that was projected by the Trustees who oversee the social security program. The 2.0% increase means the average social security recipient will receive about $25 more a month or $300 a year. COLA increases are based on the inflation measurement period of the 3rd quarter (July, August, and September).
Hurricanes Harvey and Irma caused a lot of damage and hardship but may have also contributed to the highest increase since 2012 through higher gas prices and other increased costs due to the storms.
Medicare Part B will remain at $134 a month for 2018. However, for those who are currently paying less than $134/month as part of the hold-harmless reduction there will be an increase which will offset some of the social security increase benefits. Find more about 2018 Medicare Premiums.
2019 COLA (Cost-of-Living Adjustments) Increase Watch
We won’t know the 2019 COLA increase until mid-October 2018 but here are indicators as we start the new year.
- The 2017 OASDI Trustees Report estimates the 2018 COLA to be 3.1%.
- The 2017 Q4 COLA increased 2.13% year over year.
- The December CPI-W was 2.18% higher year over year indicating a promising start towards future higher CPI-Ws in the following months.
Will Chained CPI Replace CPI-W?
Chained CPI is a new method for measuring inflation and was recently adopted with the new tax plan. Chained CPI dampens inflation by as much as .2 to .3 percent which has many advocacy groups concerned that this method will carry over to COLA. Few people are against a better measurement of inflation, in fact many advocacy group believe even the CPI-W is not the best measurement for retirees, however, Chained CPI many contend would be a step backward.
COLA (Cost-of-Living Adjustments) are for the following individuals or areas:
- Retired Military Veteran
- Disabled Veterans – See VA Disability Rate Tables
- Veterans’ Pension Benefits – Veterans Pension Rate Tables
- Survivor Benefit Annuitants – Survivors’ Pension Rate Tables
- Surviving Families of Veterans – Parents’ Dependency and Indemnity Compensation (DIC) Tables
- Social Security recipients
- Federal Civilian Retirees
- Supplemental Security Income (SSI)
- Eligibility for Medicare Extra Help and Medicaid
- Federal & State food and housing assistance programs
The 2018 COLA increase was announced on October 13, 2017.
|Official COLA Measurement – CPI-W
|Third quarter total||705.17||719.004|
|Average (rounded to the nearest 0.001)||235.057||239.668|
|Inflation According to the CPI-W||0.3%||2.00%|
Last year the COLA increase was 0.3 percent cost-of-living adjustment which was about a $4 monthly benefit increase for the average retiree, or about $48 per year.
|Quarterly CPI-W for 2016 thru 2017|
|Monthly CPI-W for 2016 & 2017|
|Month||2016 CPI-W||2017 CPI-W||YoY Increase|
2018 Cola Effective & Payment Dates:
- Retired military veterans, VA rates for compensation and pension for disabled veterans and surviving families will be effective December 1, 2017 and will be reflected on the first check to be paid on December 31, 2017.
- Social Security benefits will be effective beginning with the December 2016 benefits, which are payable in January 2018.
- Federal SSI payment levels will be effective for payments made for January 2018.
How COLA is Determined
The Cost-of-Living-Adjustments (aka Cost-of-Living Allowance) is determined by the Bureau of Labor Statistics’ Consumer Price Index (CPI-W). It is based on the percentage increase of the CPI-W from the 3rd quarter of the previous year versus the current year’s 3rd quarter (July, August, and September).
Veterans who retire during the current calendar year will receive a temporary partial COLA due to already receiving a military pay raise in January.
- The COLA increase is only set at the CPI-W if the increase is less than 2 percent.
- If inflation is between to 2 to 3 percent than COLA is set at 2 percent.
- If the CPI-W is greater than 3 percent than COLA is set at 1 percent below the CPI-W.
|History of COLA (cost-of-adjustments) since 1975|
|Money & Finance||2018 Cola|
|2018 VA Disability Rates||2018 Social Security|