The cost of living adjustment (COLA) for Social Security recipients and federal retirees has only averaged about 1% since 2012. This includes Social Security and federal retirees not receiving any increase in 2016.
The Social Security Administration will make its official announcement about the 2018 COLA in October. The final figure for 2018 will not be known until that time but experts can make an educated guess about what is going to happen.
Increasing inflation over the past 12 months may offer a measure of good news for those who receive a COLA each January. Based on Consumer Price Index (CPI) data through April of 2017, the Senior Citizens League (TSCL) estimates that the Social Security COLA for 2018 will be about 2.1% as reported in Investment News.
Social Security beneficiaries and federal retirees have lost about a third in their purchasing power since 2000. This is because the cost of items more often purchased by older people have significantly outstripped annual inflation increases in their retirement benefits.
The current formula in the Social Security Act is based on increases in the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That is only one government measure of inflation and it is not the measure that would benefit older Americans as much as other measures.
While the CPI-W resulted in no COLA increase in 2016, an inflation measure that takes into account more expenses for the elderly, the CPI-E, would have resulted in a modest increase for the same time period. If the CPI-E were the basis for the Social Security formula, the average Social Security recipient could expect their benefits to rise by $8.02 per month—or more than $96—in 2016. (See What is the Best Way to Measure Inflation?)
As we get closer to the October figure, we will keep readers advised on the latest information for the 2018 COLA.