While the CSRS, FERS and Social Security COLA for 2020 won’t be announced officially until mid-October, it is estimated to be 1.6 percent — considerably lower than the 2.8 percent cost-of-living adjustment received this year — according to a new estimate from The Senior Citizens League (TSCL).
SEE ALSO: 2020 Federal Retiree COLA Watch
“The government’s consumer price index data for August indicates that COLA recipients can expect to get a benefit boost of about 1.6 percent in 2020,” says TSCL’s Social Security policy analyst, Mary Johnson. “That would raise an average retiree benefit of $1,460.00 by about $23.40 per month, a big drop from the $40.90 that people with that level of benefits received this year,” Johnson says.
A COLA of 1.6 percent would be the lowest COLA since 2017, when the annual boost was just 0.3 percent.
SEE ALSO: Federal Retiree COLA History
Over the past decade COLAs have averaged 1.4 percent, less than half the 3 percent they averaged during the previous decade from 2000 to 2009.
According to analysis by Johnson, the below-average COLAs are having a significant impact on lifetime Social Security income and the standard of living of retirees, particularly those who have been retired since 2009. Social Security benefits are about 17.5 percent lower today than they would have been if inflation had averaged the more typical 3% over the same period. “Over ten years that’s about $17,299 less in retirement income for someone with average benefits,” Johnson notes.
Because low COLAs compound over time, this loss of income due to low COLAs will continue to grow deeper as beneficiaries age. “This has not gone unnoticed by those who depend on these annual adjustments,” she says. “Many Social Security recipients tell us their standard of living has declined,” Johnson says.
While retirees won’t be getting as much in their Social Security checks in 2020, TSCL reports that the Medicare Part B premium, on the other hand, is expected to go up considerably more than it did this year. In 2019, most beneficiaries paid $1.50 per month more than in 2018. In 2020, however, the Medicare Trustees have forecast that Part B premiums will increase from $135.50 to $144.30 per month — $8.80 per month more.
“If premiums rise by $8.80 or more, and if the cost-of-living adjustment (COLA) is 1.6 percent as we estimate, then Social Security recipients with benefits of about $550 or less are at risk of seeing the Part B premiums take their entire COLA, leaving nothing extra to deal with other rising costs,” Johnson says.
TSCL emphasizes, however, when an individual’s Part B premium rises more than the dollar amount of their COLA, that doesn’t necessarily mean that the premium deduction would cut into existing Social Security benefits. Due to a special provision of law known as the Social Security “hold harmless” provision, the Medicare Part B premium is adjusted to prevent a reduction in Social Security benefits from December of the previous year. The provision only applies to about 70% of all Medicare beneficiaries, however, and those who are not protected include people whose overall income is so low that their Medicare Part B premium is paid by state Medicaid programs, and individuals with incomes above $85,000 or married couples with incomes above $175,000.
A study by The Senior Citizens League has found that Social Security benefits have lost one third (33 percent) of buying power since 2000.