Social Security Benefits Set to Increase, but Don’t Get Too Excited
Retirees were likely quite excited to see news that their Social Security benefits are set to rise in 2018. Gail Buckner, CFP, our personal retirement and financial planning strategist, says of course that’s a welcome development. However, she points out the 2% increase still leaves many Americans far short of what they are likely to need to meet expenses. She breaks down the details of the Social Security Administration’s announcement for us—and outlines a new Congressional bill that may change the benefits equation down the road.
There’s good and bad news about the announced increase in Social Security benefits starting next year.
Retired? Good News (Sort of)
If you are getting a monthly Social Security check, the amount you receive will go up 2% starting in January. Those who also qualify for a Supplemental Social Income (SSI) benefit will see it increased by the same percentage.
Although any increase is welcome news for the more than 66 million retirees—who did not see any increase in their 2016 benefits and got a boost of just three-tenths of a percent in this year’s benefit amount—it’s probably not worth getting too excited about.
Many older Americans are quick to point out that health-related costs are consuming a larger portion of their budget each year and even with a 2% increase in their monthly Social Security check in 2018, they are steadily losing ground.
A major study by the federal Centers on Medicare and Medicaid (CMS) confirms that the amount both the government and individuals spend on medical-related expenses has been going up for the past 50 years. In fact, health care expenditures have steadily increased as a share of gross domestic product (GDP), rising from 5% of GDP in 1960 to 17.4% in 2013.1
Moreover, this trend is expected to continue for the foreseeable future. Overall, Americans are expected to shell out 5.6% more on health expenses each year through 2024.2
You don’t have to be retired to know that the prices you are paying for most things are higher today compared with a few years ago.
So why didn’t retirees get a benefit increase last year? It’s because of the way Congress requires Social Security to calculate inflation when determining whether benefits should be adjusted.