Since 1975, automatic cost-of-living adjustments (COLA) for Social Security recipients occur when there is an increase in inflation as measured by the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W). Increases in Social Security benefits occur when there is an increase in the average CPI-W for the third quarter when compared to the third quarter of the last year in which a COLA was made.
What does this mean for 2017’s Social Security COLA? Since Social Security recipients did not receive a COLA for 2016, the calculation for 2017 will be based on the difference between the 2016 third quarter and the 2014 third quarter average CPI-W. The base (2014 third quarter average) from which the increase, if any, will be measured is 234.242. If the percentage increase from the base is at least one-tenth of one percenter (0.1 %), Social Security recipients will receive a COLA. Although we’ve seen a slight increase in the CPI-W during the second quarter of 2016, the average stands at 234.397 which is less than a 0.1% increase over the base. If the current trend continues, Social Security recipients could go another year without an increase.
The Social Security Administration should officially announce the 2017 COLA, or lack thereof, in mid-October at which time we will update you accordingly.
If you would like a detailed analysis on your own Social Security filing strategies, please feel free to call (205-967-4200) or email me (pat@meldfinancial.com).