Millions of Social Security recipients and federal retirees will get a 0.3 percent increase in monthly benefits next year, the fifth year in a row that older Americans will have to settle for historically low raises. There was no increase this year. Next year's benefit hike will be small because inflation is low, driven in part by lower fuel prices.
The federal government announced the cost-of-living adjustment, or COLA, Tuesday. By law, the COLA is based on a government measure of consumer prices. The COLA affects more than 70 million people — about 1 in 5 Americans. The average monthly Social Security payment is $1,238. That adds up to a monthly increase of less than $4 a month.
More bad news for seniors: Medicare Part B premiums, which are usually deducted from Social Security payments, are expected to increase next year to the point in which they will probably wipe out the entire COLA. By law, increases in premiums for most Medicare recipients cannot exceed their Social Security COLA. Since 2008, the COLA has been above 2 percent only once, in 2011. It's been zero three times. That's known as the "hold harmless" provision, and it protects the majority of Medicare recipients. However, new enrollees and high-income retirees are not covered by the hold harmless provision, so they could face higher Medicare premiums. Those premiums will be announced later this year.