Will You Get a Social Security Increase in 2017?

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The Social Security Administration disappointed lots of Americans last year when it decided against an annual cost-of-living increase. The failure to increase Social Security payments put recipients in a tight spot because some Medicare expenses that are withdrawn automatically from Social Security checks still increased. Will the Social Security Administration frustrate recipients again or will Social Security benefits head higher in 2017?

Social Security stagnates in 2016

The Bureau of Labor Statistics (BLS) tracks the direction of prices for goods and services in America and BLS' data on price inflation is used by the Social Security Administration to determine if Social Security benefits should be increased every year.

The SSA averages the BLS' monthly consumer price index for urban wage earners and clerical workers (CPI-W) in the third quarter of the current year and then compares it to the average CPI-W reported for the third quarter of the preceding year. If the current year's third quarter average is higher than the preceding year's third quarter average, then a cost-of-living increase is granted for the following year.

For example,the average CPI-W for the third quarter of 2014 was 234.242 and the average for the third quarter of 2015 was 233.278. Because the third quarter 2015 average was lower than the third quarter 2014 average, there was no Social Security increase for recipients in 2016.

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Period CPI-W
Month 2014 2015
July 234.525 233.806
August 234.03 233.366
September 234.17 232.661
Third quarter total 702.725 699.833
Average (rounded to the nearest 0.001) 234.242 233.278

Data source: Social Security Administration.

This year was the first year since 2010 that Social Security benefits didn't increase, and as you can see in the following table, since 1975 Social Security benefits have increased in all but three years. On average, Social Security benefits have increased by 3.88% per year since 1975 and 2.27% since 2000.

Data source: Social Security Administration.

The failure to increase benefits this year was especially frustrating because the cost of Medicare Part D plans increased for many beneficiaries, and those costs are often taken directly out of monthly Social Security benefits.

Medicare Part B plan premiums also increased in 2016 to $121.80 from $104.90 in 2015, however, a hold-harmless provision passed in the Bipartisan Budget Act of 2015 froze Part B premiums at the 2015 rate for about 70% of Part B beneficiaries. The hold-harmless provision didn't limit premiums fornew enrollees, enrollees who do not receive Social Security benefit checks, enrollees with high incomes who are subject to premium adjustments, and dual Medicare-Medicaid beneficiaries.

A slight boost to Social Security could be coming in 2017

While Social Security benefits did not increase this year, current BLS inflation data suggests that benefits could climb in 2017.

The CPI-W was 234.789 in July, up 0.42% from 233.806 a year ago, and if we compare the average CPI-W for May, June, and July to the average CPI-W for May, June, and July of 2015, then CPI-W is up 0.57%.

The BLS will report CPI-W for August on Sept. 16 and for September on Oct. 18, so there's a chance that an increase could still come off the table. However, it appears that recipients are on track for a modest uptick in their Social Security benefits in 2017.

Unfortunately, it may not be all good news for Social Security recipients in 2017. The modest increase in Social Security benefitsmay trail Medicare Part D premium increases again next year. The hold-harmless provision will keep a lid on part B premiums if Social Security benefits don't increase, or only increase a little, but Part D premiums are expected to increase by 4.4% to an estimated $34 per month next year, according to the Centers for Medicare and Medicaid Services.

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