Millions of Social Security recipients and retirees will receive a 2% increase in benefits next year, the largest gain since 2012.
The Social Security Administration announced the cost-of-living adjustment (COLA) increase Friday. It amounts to about $25 a month for the average beneficiary. Over the past eight years, the annual COLA has averaged just above 1%. In the previous decade, it averaged 3%.
Even though the bump will be welcome to millions of people receiving Social Security checks, some senior citizen advocates say the increases are not enough. Advocacy group Senior Citizens League says Social Security benefits only buy about 70% of what they did in 2000. That is because more money goes to health care, including prescription drugs, prices of which have outpaced inflation.
The COLA will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 29, 2017, according to the Social Security Administration.
The estimated average monthly benefit for all retired workers in 2016 is $1,341.
Among other announcements from the Social Security Administration:
— The maximum amount of earnings subject to the Social Security tax, or taxable maximum, will increase to $128,700.
— The earnings limit for workers who are younger than “full” retirement age — those 66 years old for people born in 1943 through 1954 — will increase to $17,040.
— The earnings limit for people turning 66 in 2018 will increase to $45,360.
There is no limit on earnings for workers who are “full” retirement age or older for the entire year.
COLA, enacted by Congress in 1975, is based on a broad measure of consumer prices generated by the Bureau of Labor Statistics. The purpose of the COLA is to ensure that the purchasing power of Social Security and SSI benefits is not eroded by inflation.
The government said Friday that the consumer price index (CPI) rose 0.5% in September, the second increase in a row and the largest in eight months. Much of the increase was because of higher gasoline prices caused by a disruption from hurricanes in the South. If food and energy are stripped out, core CPI rose 0.1%.
The recent rise in CPI pushed the annual rate of inflation to 2.2% from 1.9%. The more closely followed core rate, however, was unchanged at 1.7% for the fifth month in a row.