Contributed by: Kali Hassinger, CFP®
The Social Security Administration recently announced that monthly benefits for nearly 69 million Americans will increase by 1.6% beginning in January 2020. The adjustment is calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, through the third quarter. This cost of living adjustment (COLA, for short) is slightly less than the raises received in 2018 and 2019, which were 2% and 2.8%, respectively.
For many, Social Security is one of the only forms of guaranteed, fixed income that will rise over the course of retirement. The Senior Citizens League estimates, however, that Social Security benefits have lost approximately 33% of their buying power since 2000. This is why, when running retirement spending and safety projections, we factor an erosion of Social Security’s purchasing power into our clients’ financial plans.
So far, no changes to the Medicare premium and Social Security wage base tax have been announced, but they are expected by year end. Medicare trustees estimate Part B premiums will increase by about $9 per month for those not subject to the income-related surcharge. Unfortunately, the Social Security COLA adjustment is often partially or completely wiped out by the increase in Medicare premiums.
Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.