While the final projections are still to come later in 2017, it is currently estimated that the over 60 million people that are enrolled in the social security program can expect as much as a 2.2% increase in 2018. If it comes to fruition, this will be the largest increase in six years, and that amount will be about 700% greater than the 2017 increase.
Now with that being said, the fact is that these annual Social Security adjustments are really based on inflation. So while a senior citizen and/or retiree should more than likely expect more money during 2018, the fact is that their cost of living is probably higher now than what it was in the past. So a positive is offset with a negative!
Impact to beneficiaries
Where do we start? A 2.2 percent increase may not seem like much, but this about what the average American worker’s paycheck has increased has increased. But the fact is that a ~2 percent increase is not generally equivalent to much.
The Social Security Administration expects about 61 million Americans to be impacted by this 2018 increase. That is roughly 20% of the population. Most of those who are on security security are retirees. But there are also number of disabled workers as well as surviving spouses and/or children who benefit from the payments from their deceased loved ones.
So how much does a 2.2% increase equate too? Since the average monthly payment is about $1250, this means beneficiaries can expect about a $25 per month increase, or about $300 per year! Not much is it. That amount can barely pay for one generic medication (if it can cover it at all). It can barely pay for a meal out or maybe a shirt for children who rely on payments from a deceased parent. $25 per month is not much money.
But we do hope that people have become use to these small increases. As for the last 6 years the annual increase has been much less than that. There were even a couple years (2015 and 2010) in which the cost of living adjustment was ZERO! Yes, that is right…no monetary increase for those 60 million people.
There is another decision that has been made around 2018 benefits as well. The Social security Administration trustees expect that Medicare Part B premiums will not increase. What has happened in the past is any monthly increase is social security was either completely (or mostly) offset with higher Medicare payments. This will not take place this year, so seniors will not be impacted by that.
Future planning for social security beneficiaries
It is strongly recommended that anyone near retirement (or the younger generations) should never depend on social security. It is estimated that by 2034 the Social Security program will be spending more than it takes in, which is bad news. This would lead to cuts in payments, maybe eligibility age increases, and other financial changes.
The younger generation is sure to be hit harder than people in and/or near retirement. A baby born today may very well get nothing from social security when they are older. Americans in their teens, twenties, thirties, etc. may also be at risk to cutbacks. While time will tell how all this plays out, that 2018 increase of a couple percentage may sound good to younger people!
We also recommend that current beneficiaries should budget as if they will never get a future increase…people should not rely on that annual adjustment in 2018 or any future year. As there is no telling if/when the program will be cut back. While the chances are that if that ever happens, that current retirees will not be impacted, but they should never count on that. As there are no guarantees in life.