It will help retirees out, but it will not help them get ahead.

Seniors got a little good news this fall. Next year, monthly Social Security income payments to retirees will increase by 2.0%. That will mean an extra $326 – roughly $27.40 a month – for the average Social Security recipient in 2018.(1)

This is the largest cost-of-living adjustment (COLA) to Social Security benefits since 2012. In that year, retirees received 3.6% more in benefits than they had in 2011.(2)

Unfortunately, the 2.0% increase may not make much of a difference. After all, the COLA does not constitute a gain on inflation, but merely a response to it.

The Senior Citizens League, an advocacy group for retirees, thinks that rising Medicare premiums could absorb the 2.0% COLA for 70% of Social Security beneficiaries. Whether that happens or not, some analysts think retirees deserve larger Social Security COLAs than the ones they receive.(2)

The COLAs have constantly fallen short of rising housing costs and medical costs. In fact, yearly health care inflation exceeded annual Social Security COLAs in 33 of the 35 years ending in 2016.(3)

Should the method for figuring the annual COLA be changed? Perhaps it should be, as other metrics can be used.

When the federal government figures out annual COLAs for Social Security, it references the annualized advance in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Critics argue that the CPI-W is the wrong benchmark. They feel COLAs should be calculated using the Consumer Price Index for the Elderly (CPI-E). The CPI-E only tracks spending for households headed by those aged 62 or older.(3)

Back in 2011, the Bureau of Labor Statistics scrutinized both the CPI-W and CPI-E. It determined that the CPI-E gave greater weight to rent and mortgage expenses and health care costs, but slightly less weight to education, food, entertainment, clothing, and transportation expenses. The CPI-E may, therefore, be a better measure of senior expenses – and if it is ever used as a yardstick to measure Social Security COLAs, those COLAs might be larger.(3)

Given all this, why does the federal government keep using the CPI-W to figure out COLAs? The CPI-E, it turns out, has flaws of its own. It does not include any Medicare Part A expenses, and the larger COLAs it would potentially generate for retirees would also help to speed the drawdown of Social Security’s coffers.(3)

A 2.0% raise may not be much, but it beats what happened in 2016 and 2017. The 2017 COLA was only 0.3%, and retirees went without any COLA the year before.(2)

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/social-security-checks-expected-to-increase-2-in-2018-2017-10-13/ [10/13/17]

2 - cnbc.com/2017/10/13/medicare-premiums-may-devour-increased-2018-social-security-benefit.html [10/13/17]

3 - fool.com/retirement/2017/08/05/social-security-benefits-are-expected-to-increase.aspx [8/5/17]

Other Information:

Adams Wealth Management Group LLC (“Adams Wealth Management”) is a registered investment adviser offering advisory services in the State of Texas and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Adams Wealth Management in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Adams Wealth Management, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment strategy or plan will be successful.

It will help retirees out, but it will not help them get ahead.

Seniors got a little good news this fall. Next year, monthly Social Security income payments to retirees will increase by 2.0%. That will mean an extra $326 – roughly $27.40 a month – for the average Social Security recipient in 2018.(1)

This is the largest cost-of-living adjustment (COLA) to Social Security benefits since 2012. In that year, retirees received 3.6% more in benefits than they had in 2011.(2)

Unfortunately, the 2.0% increase may not make much of a difference. After all, the COLA does not constitute a gain on inflation, but merely a response to it.

The Senior Citizens League, an advocacy group for retirees, thinks that rising Medicare premiums could absorb the 2.0% COLA for 70% of Social Security beneficiaries. Whether that happens or not, some analysts think retirees deserve larger Social Security COLAs than the ones they receive.(2)

The COLAs have constantly fallen short of rising housing costs and medical costs. In fact, yearly health care inflation exceeded annual Social Security COLAs in 33 of the 35 years ending in 2016.(3)

Should the method for figuring the annual COLA be changed? Perhaps it should be, as other metrics can be used.

When the federal government figures out annual COLAs for Social Security, it references the annualized advance in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Critics argue that the CPI-W is the wrong benchmark. They feel COLAs should be calculated using the Consumer Price Index for the Elderly (CPI-E). The CPI-E only tracks spending for households headed by those aged 62 or older.(3)

Back in 2011, the Bureau of Labor Statistics scrutinized both the CPI-W and CPI-E. It determined that the CPI-E gave greater weight to rent and mortgage expenses and health care costs, but slightly less weight to education, food, entertainment, clothing, and transportation expenses. The CPI-E may, therefore, be a better measure of senior expenses – and if it is ever used as a yardstick to measure Social Security COLAs, those COLAs might be larger.(3)

Given all this, why does the federal government keep using the CPI-W to figure out COLAs? The CPI-E, it turns out, has flaws of its own. It does not include any Medicare Part A expenses, and the larger COLAs it would potentially generate for retirees would also help to speed the drawdown of Social Security’s coffers.(3)

A 2.0% raise may not be much, but it beats what happened in 2016 and 2017. The 2017 COLA was only 0.3%, and retirees went without any COLA the year before.(2)

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/social-security-checks-expected-to-increase-2-in-2018-2017-10-13/ [10/13/17]

2 - cnbc.com/2017/10/13/medicare-premiums-may-devour-increased-2018-social-security-benefit.html [10/13/17]

3 - fool.com/retirement/2017/08/05/social-security-benefits-are-expected-to-increase.aspx [8/5/17]

Other Information:

Adams Wealth Management Group LLC (“Adams Wealth Management”) is a registered investment adviser offering advisory services in the State of Texas and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Adams Wealth Management in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Adams Wealth Management, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment strategy or plan will be successful.

Examining the 2018 Social Security COLA ultima modifica: 2017-11-09T08:00:11-05:00 da Adams Wealth Management

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Other Information:

Adams Wealth Management Group LLC (“Adams Wealth Management”) is a registered investment adviser offering advisory services in the State of Texas and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Adams Wealth Management in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Adams Wealth Management, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment strategy or plan will be successful.