Some seniors are dependent on their Social Security benefits, but the majority of your retirement income may be derived from other sources. While your Social Security income may not be your primary source of income in retirement, you nonetheless may be counting on that income to provide financial support for your quality of life in a modest capacity. Social Security benefits increases have been minimal most years since 2000. The exception was in 2012 when benefits increased by 3.6 percent. However, in 2010, 2011 and 2016, there was no cost-of-living adjustment. The announced cost-of-living increase for the 2019 calendar year is 2.8 percent.
More than 67 million Americans are Social Security beneficiaries, so this has a major impact on the lives of many people. The modest increase in income is not the only change made by the Social Security Administration for 2019. The amount of income that can be taxed for Social Security has increased, and the earnings limit for some individuals has also been adjusted.
While this year’s increase is substantially higher than the increase in most years in recent history, it is not enough to compensate recipients for the diminished buying power of their Social Security income. The Senior Citizens League has estimated that the buying power of Social Security benefits has decreased by 34 percent since 2000. This estimate takes into account the planned increase in benefits for 2019. Over this same period of time, this organization estimates that expenses for seniors have increased by as much as 96 percent. For example, homeowners insurance premiums for seniors have increased by 164 percent and property taxes have increased by 129 percent in this time period. Prescription drug costs have increased by 188 percent, and home heating oil costs have increased by 181 percent.
In recent years, cost-of-living adjustments to Social Security benefits has also resulted in an increased premium for Medicare premiums. In fact, the net benefit for many retirees has been minimal when both factors are taken into account. Updates to Medicare premiums for 2019 have not yet been released. However, because the cost-of-living adjustment for this year is substantial, any premium increases are not expected to make a huge impact on the raise that many beneficiaries are receiving for 2019. Keep in mind that Medicare premiums have increased by 195 percent between 2000 and today, and Medigap costs have increased by 158 percent.
While the impact of the Social Security benefits increase this year and in the next few years may have a modest impact on your financial situation at the moment, you can see that continued increases to senior living expenses could make you more reliant on Social Security benefits in the years ahead. It is important that you pay attention to benefits adjustments, Medicare costs and cost-of-living increases in the years ahead as their effects can become increasingly significant as you get older. In addition, now that you know more about the increase to Social Security benefits in 2019, you can update your financial plan and budget going forward.