The Social Security Administration announced Friday that more than 65 million recipients will get a 2% cost-of-living adjustment (COLA) in 2018, after receiving a 0.3% boost in 2017 and no increase for inflation in 2016. But if you have Medicare Part B and have the premium deducted from your Social Security each month, you probably won't be getting any more money than you do now.
The average benefit will rise by $27 a month to $1,404 in 2018 and $46 a month for a couple to $2,340. Most recipients will find most or all of that increase eaten up by a jump in Medicare Part B premiums.
The 2% benefits boost is based on the increase in the Consumer Price Index from the third quarter of last year to the third quarter of 2017. A different index is used to set the maximum amount of income subject to Social Security taxes, and that means a bigger tax bill for about 12 million higher earning workers. Employees and employers each pay a 6.2% Social Security tax on wages, while the self-employed pay the whole tax--12.4%. The wage base increase means the maximum Social Security tax per worker will be $15,959 in 2018, up $186 from 2017.
By law, normal Part B premiums are supposed to cover 25% of Medicare's costs for providing doctor and outpatient services, but a “hold harmless” provision says no increase in Medicare premiums can reduce a Social Security recipient's net monthly check below what it was the previous year. Since retirees got no Social Security increase in 2016 and only a 0.3% hike in 2017, 70% of those on Social Security are now paying an average of $109 a month, instead of the $134 that would be needed to cover 25% of costs.
So now that the monthly Social Security benefit is going to be increased, the amount those on Medicare Part B pay will also increase. The final figure is yet to be determined--but that $134 (what it should have been this year) would eat up a $25 per month increase in benefits.
So if you're on Social Security, you'll get a "raise" next year--you just won't be getting any more money.