Quote:An Early Peek at Social Security's 2019 COLA
This could be the biggest raise since 2012, but that's not the whole story.
Sean Williams
(TMFUltraLong)
Jul 8, 2018 at 7:06AM
What might Social Security's COLA deliver in 2019?
What you're probably wondering right now is what Social Security's COLA might look like for 2019. While nothing is set in stone, given that we don't even have data from the three months that actually count (July-September), as an early glimpse I'd suggest that there's a good chance it could be the biggest raise since 2012, with a slim possibility of it being the largest raise in a decade.
Back in 2012, Social Security beneficiaries received a 3.6% raise, which was the largest COLA since the 5.8% increase passed along in 2009. In each of the other years since 2009, COLA has ranged between 0% (2010, 2011, and 2016) and a pedestrian 2% (2018).
According to the May inflation data release from the BLS, which primarily tracks the Consumer Price Index for All Urban Consumers (CPI-U), the CPI-W has increased exactly 3% on a trailing-12-month basis. To reiterate, the data from May, and all subsequent months this year, won't have any bearing on Social Security's 2019 COLA.
It does, however, offer insight to the inflationary trends that could help narrow down the expected COLA for next year.
The CPI-U inflation data, which is similar to the CPI-W, shows that energy has been the primary driver of higher prices. On an unadjusted 12-month basis, aggregate energy prices have risen by 11.7% as of May 2018, with gasoline and fuel oil costs up by 21.8% and 25.3%, respectively.
Shelter and transportation services also saw increases of 3.5% and 3.8%, respectively. Meanwhile, new and used vehicles are the only line items to have observed year-on-year deflation over the past 12 months.
With the summer driving season kicking into full swing, and prices at the pump soaring in the wake of four-year highs for crude oil prices, energy commodities have a really good shot (at least right now) of carrying Social Security's 2019 COLA above the 3% mark.
Keep in mind that hurricanes Harvey and Irma, which disrupted production and refining capacity throughout the Gulf of Mexico and the southeastern U.S. last year, played a critical role in lifting COLA by 2% for 2018.
If this hurricane season is anything like last year's, any extended disruption in the domestic refining industry could give Social Security's COLA an outside chance of eclipsing 3.6%, as it did in 2012, ultimately pushing it to a 10-year high.
https://www.fool.com/retirement/2018/07/08/an...-cola.aspx
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