Retirees receiving Social Security benefits will see their payments rise next year. But the increase will be tiny — about enough to splurge on an extra latte each month.
The Social Security Administration announced Tuesday that the tens of millions of people receiving retirement and supplemental benefits will see payments increase by 0.3 percent next year. For the average retiree, that will lead to an extra $3.92 a month.
Retirees have grown used to seeing no or little-to-no pay increases over the past several decades as inflation has stayed low. The cost-of-living adjustments, which are linked to the consumer price index, have been especially low in recent years because of low gas prices. This year, for instance, benefits did not grow at all, the third time since 2010 that there was no cost-of-living adjustment.
“After last year’s zero COLA, this year’s announcement doesn’t offer much help to the millions of families who depend on their Social Security benefits,” Jo Ann Jenkins, chief executive of AARP, said in a statement.
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More than 60 million people receiving Social Security benefits will notice the small increases in January and the 8 million people receiving supplemental benefits will see a bump at the end of the year. The average monthly Social Security check received by retirees is $1,305.
The 0.3 percent boost is the smallest increase in history for cost-of-living adjustments, which have been in place since 1975. The last benefit increase, in 2015, was 1.7 percent.
Paul Rosa, a 67-year-old retiree in Charles Town, West Virginia, said he estimates his benefit increase might be enough for him to treat himself to one meatball sub a month from Subway, which costs about $3.50 near him when it’s on special. Though he might actually fall a bit short, since the increase on his $1,100 monthly paycheck will be closer to $3.30.
“I went out to the nurses’ station and announced the big news,” joked Rosa, who said he is grateful to be supplementing his Social Security check with a pension and other income.
“I couldn’t depend on an increase in Social Security,” he said. “It’s not meaningful.”
The adjustments are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, a measure from the Bureau of Labor Statistics that takes into account expenses such as food, housing, clothing, medical care and transportation.
Consumer advocates have criticized the inflation measure in recent years, arguing that it does not accurately reflect the expenses retirees face. For instance, many retirees no longer are commuting on a daily basis, so they don’t benefit as much as workers do from falling gas prices. The inflation statistic also may not consider all of the health care costs that retirees have to pay, some retirement experts say.
A more notable change may be felt by higher-income earners, who may face payroll taxes on a bigger share of their income next year. The maximum income subject to Social Security taxes is increasing to $127,200 in 2017, up from $118,500 this year. About 12 million workers will pay more in taxes because of the change, the administration estimates. The income cap is indexed to match wage growth but was not increased this year because it cannot be raised in years in which there is no cost-of-living adjustment.