October has been an incredibly pivotal month for Social Security beneficiaries. Considering 62% of all retired workers are reliant on their benefit to account for at least half of their monthly income, there was no more important event than the release of September's inflation data from the Bureau of Labor Statistics (BLS) on Oct. 11. This data point was the last piece of the puzzle needed for the Social Security Administration (SSA) to determine the 2019 cost-of-living adjustment, or COLA.

Social Security's COLA, or more simply the "raise" that'll be passed along in January to the more than 62 million people currently receiving a monthly benefit check, only takes into account readings from the Consumer Price Index for Urban Wage Earners and Clerical Workers during the third quarter (July through September). The average reading from the third quarter of the previous year serves as the baseline number, while the average reading from the current year is the comparison. If prices rise year over year, then beneficiaries receive the difference, expressed as a percentage and rounded to the nearest 0.1%.

Two Social Security cards lying atop fanned piles of cash.

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What will a 2.8% COLA look like for the average Social Security recipient?

Following the BLS data release on Oct. 11, the SSA announced that Social Security's COLA would be a healthy 2.8% in 2019. That represents the highest raise beneficiaries will receive since 2012. Notably, higher energy prices (e.g., gasoline and fuel oil), along with shelter inflation, were most responsible for pushing COLA higher.

But what does this mean for the average Social Security beneficiary? The SSA's recent fact sheet that highlights all of the upcoming changes for 2019 offers insight on what a 2.8% COLA might look like for a variety of recipients come January. Please keep in mind that these are estimated average benefits from the SSA, and thus could change a bit by the time January rolls around. 

  • Retired workers: Before receiving a 2.8% COLA, the average retired worker is expected to bring home $1,422 a month. But after their "raise," the average retiree should be netting $1,461 a month, or an extra $468 per year.
  • Aged couple, both receiving benefits: At the moment, the average aged couple where both retirees are receiving benefits brings home $2,381 a month. After a 2.8% COLA, this figure is expected to increase to $2,448 monthly. That's $804 extra a year for the average aged couple as of January 2019.
  • Disabled workers: We often forget that while Social Security is geared to protect seniors during retirement, it also provides benefits to around 10 million disabled workers and their families. With the average disabled worker taking home $1,200 a month, the 2.8% COLA will add $34 monthly, or $408 annually, to boost this payout to $1,234 per month.
  • Aged widow(er), alone: Similarly, we forget that nearly 6 million people, most of them aged beneficiaries, may also receive survivor benefits once their spouse passes away. For seniors whose partner has passed, the average Social Security benefit is expected to increase by $38 monthly ($456 annually) to $1,386 after the 2.8% COLA.
A senior man counting a fanned pile of cash in his hands.

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Averages are just that... averages

While it's great that the average Social Security benefit appears to be rising nicely in 2019, it's just as important to remember that averages are nothing more than that... averages. Your unique case will almost assuredly be different.

For example, not everyone is going to benefit from the biggest raise in seven years. Enrollees in both Social Security and Medicare were, for the early part of the decade, protected by the hold harmless provision. This clause prevents an aged beneficiary's Medicare Part B premium from rising at a quicker pace than their Social Security COLA. Since Part B premiums are automatically deducted from a recipients' monthly payout, benefits could actually drop year over year without this provision.

The issue is that once Part B premium inflation slowed, those folks who'd been protected with lower-than-standard-rate premiums now have to play catch-up. Though upper and middle-income beneficiaries are likely to see the full COLA in 2019, an estimated 5 million-plus lower-income aged beneficiaries will not, according to The Senior Citizens League. In fact, some may not see any real increase at all. 

A person filling out a Social Security benefits application form.

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Beneficiaries should also understand that the single greatest impact you can have on your monthly payout, aside from your earnings history, is your claiming age. That's because your payout grows by 8% for each year you hold off taking it, beginning at age 62 and ending at age 70.

If we examined two identical individuals (i.e., same earnings history, work history, and birth year), the one claiming at age 70 could earn 76% more per month than the one claiming at age 62. Then again, factors that include individual health, marital status, and financial well-being will certainly play a role in your claiming decision. Or, put differently, waiting isn't always going to be your best option.

Long story short, Social Security's 2.8% COLA is going to be a positive for more beneficiaries next year than the 2% COLA was in 2018. But the true impact will vary based on the unique situations of each beneficiary.