Why Your 2018 Social Security Check Might Not Grow as Much as You'd Like
One of the most important aspects of Social Security is that the income that it provides is adjusted every year to keep up with inflation. Earlier this month, the Social Security Administration released their figures revealing the cost-of-living adjustment for Social Security in 2018. Social Security benefits will go up by 2% next year, but even though that COLA is the largest in several years, many Social Security recipients won't actually see their monthly checks go up by that amount. Instead, a portion of their raise will go toward covering healthcare costs under Medicare.
The SSA figures out how big each year's cost-of-living adjustment will be by looking at data on prices. The CPI-W is one part of the Consumer Price Index that the Bureau of Labor Statistics tracks, and to figure the correct COLA, the SSA looks at the average of the CPI-W numbers for the three months of July, August, and September. It then compares that number to the average of the CPI-Ws for those same three months in the previous year. The percentage difference becomes the COLA that takes effect in January of the following year.
For 2017, the average for the CPI-W during the summer months was 239.668, helped by a substantial increase in September due to rising fuel prices. That was 1.96% higher than the corresponding figure of 235.057 in 2016. The SSA rounded the figure up to the nearest tenth of a percentage point, resulting in the 2% COLA.
Source: Fool.com
