The 2018 COLA raised SSDI payments by 2 percent

In December 2017, the Social Security Administration announced a 2 percent cost of living adjustment (COLA) for 2018. This meant that starting in January 2018, the average SSDI payment increased by roughly 2 percent from what it had been in 2017. For someone receiving $1,000 per month in 2017, that translated to an additional $20 per month beginning in January 2018.

The 2 percent figure came from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), measured from the third quarter of 2016 to the third quarter of 2017. Social Security calculates COLA each year using this same index, which tracks inflation across food, housing, transportation, and other household costs. Because inflation was modest during that period, the 2018 increase was smaller than the adjustments in some prior years.

This adjustment applied to all SSDI beneficiaries automatically—no action was required. The increase also applied to Supplemental Security Income (SSI) payments and to the benefits of people receiving Social Security retirement or survivor benefits. Medicare Part B premiums, however, were held flat that year due to a separate rule, so some beneficiaries saw no net gain in take-home income.

Key Takeaways

  • The 2018 COLA was 2 percent, calculated from inflation data collected between mid-2016 and mid-2017.
  • The increase took effect automatically in January 2018 with no process or action required from beneficiaries.
  • Medicare Part B premiums remained unchanged in 2018, which meant some beneficiaries saw little or no net increase in monthly income.
  • COLA amounts vary year to year based on the Consumer Price Index; the 2 percent figure was lower than adjustments in 2016 and 2017.

How the 2018 COLA was calculated

Social Security uses a specific formula to determine each year's COLA. The agency compares the average Consumer Price Index for the third quarter of the current year to the average for the third quarter of the previous year. In 2018, that meant comparing July, August, and September 2017 prices to July, August, and September 2016 prices. The percentage increase between those two periods becomes the COLA.

The index used is the CPI-W, which tracks prices paid by urban wage earners and clerical workers—a subset of the broader Consumer Price Index. This index includes food, energy, housing, transportation, medical care, and other goods and services. Because energy prices fell during the 2016–2017 period and other inflation remained low, the overall increase was modest.

Congress set this formula into law in 1975 and has not changed it since. The formula is automatic, meaning no politician or administrator decides whether to grant a COLA—the math determines it. If inflation is zero or negative, COLA is zero; there is no automatic decrease to benefits. This "no-cut" rule has been in place since 1983.

What the 2018 increase meant in practice

The 2 percent increase was applied to the Primary Insurance Amount (PIA) for each beneficiary. The PIA is the base monthly payment amount calculated when a person first becomes may have access to to SSDI. When COLA is announced, Social Security multiplies each person's PIA by 1.02 (representing a 2 percent increase) and rounds the result to the nearest dollar.

Because SSDI payments vary widely depending on a person's work history and earnings record, the dollar amount of the increase differed for each person. Someone receiving $500 per month gained $10; someone receiving $2,000 per month gained $40. The percentage was uniform, but the dollars were not.

The 2018 COLA also increased the maximum family benefit and the earnings test threshold—the amount a working beneficiary can earn before benefits are reduced. These thresholds are tied to the national average wage index, which also rose that year, so the work incentive rules shifted slightly in beneficiaries' favor.

Why 2018's increase was smaller than recent years

The 2 percent COLA in 2018 was notably lower than the increases in 2016 (0.3 percent) and 2017 (2 percent). It was also smaller than the 3.6 percent increase in 2012 or the 5.8 percent increase in 2008. The size of COLA depends entirely on inflation, which fluctuates based on energy prices, wage growth, housing costs, and other economic factors.

Between mid-2016 and mid-2017, inflation was restrained. Energy prices remained relatively stable after the sharp declines of 2015 and 2016. Wage growth was modest. Housing costs rose in some regions but not uniformly. The result was a 2 percent overall increase in the CPI-W, which became the 2018 COLA.

This pattern illustrates why COLA amounts cannot be predicted far in advance. The adjustment is determined by actual inflation data, not by forecasts or policy decisions. Beneficiaries who rely on SSDI as their sole income source cannot know in advance what their payment will be in a given year.

The Medicare Part B premium freeze and its effect

Although SSDI payments increased by 2 percent in 2018, many beneficiaries who were also enrolled in Medicare Part B saw no net gain. In 2018, Medicare Part B premiums were held flat at $134 per month—the same as 2017. This occurred because of a rule called the "hold-harmless" provision, which prevents Medicare Part B premiums from rising faster than Social Security benefits for most beneficiaries.

For people whose SSDI payment was large enough that the 2 percent increase exceeded the Part B premium, the full COLA benefit was realized. But for beneficiaries with smaller SSDI payments, the entire 2 percent increase was consumed by other costs—medical expenses, prescription drugs, or straightforward the rising cost of living—leaving no net increase in spendable income.

This dynamic illustrates a common frustration among SSDI beneficiaries: COLA adjustments are calculated on the basis of inflation in the general economy, but they do not account for the specific costs that disabled people face, such as medical care, assistive equipment, or transportation to medical appointments. Medical inflation often outpaces general inflation, meaning that COLA increases may not keep pace with the actual cost increases beneficiaries experience.

How 2018 compares to other recent COLA years

The 2018 COLA of 2 percent fell in the middle range of recent adjustments. The years 2009 through 2015 saw no COLA at all—inflation was so low or negative that no adjustment was warranted. In 2016, a 0.3 percent COLA was announced, the smallest increase on record. In 2017, the COLA rebounded to 2 percent. The 2018 figure matched 2017.

In the years before the 2008 financial crisis, COLA amounts were typically larger. From 2000 to 2007, annual adjustments ranged from 1.4 percent to 3.3 percent. The 5.8 percent increase in 2008 was driven by spiking energy and food prices. After the recession, inflation remained subdued for years, resulting in the zero-COLA period.

The variation in COLA amounts underscores why SSDI beneficiaries cannot rely on a fixed annual increase. The adjustment is tied to inflation, which is volatile and unpredictable. Planning a budget on the assumption of a specific COLA is risky; beneficiaries and their families should build financial plans around the current payment amount and treat any COLA increase as a buffer.

What happened to other benefit programs in 2018

The 2 percent COLA applied uniformly across SSDI, Social Security retirement benefits, and Social Security survivor benefits. Supplemental Security Income (SSI) payments also increased by 2 percent. However, SSI beneficiaries faced a complication: the federal benefit rate increased, but many states supplement the federal SSI payment with their own state funds, and not all states increased their supplements by the same percentage or at the same time.

Veterans receiving disability compensation from the Department of Veterans Affairs also received a 2 percent increase in 2018, as the VA ties its COLA to the same Social Security formula. Railroad Retirement beneficiaries received the same 2 percent adjustment. Federal civilian retirees and military retirees received their own COLA calculations, which are based on the same CPI-W index but applied differently.

The uniformity of the 2 percent figure across these programs meant that 2018 was a year of consistent, modest increases across the federal disability and retirement benefit landscape. No program received a larger or smaller adjustment; all were subject to the same inflation data.

Frequently Asked Questions

Did I have to do anything to receive the 2018 COLA increase?

No. The COLA increase was applied automatically to all SSDI beneficiaries in January 2018. Social Security recalculated each person's payment and the new amount was paid starting that month. No process, form, or action was required.

Why was the 2018 COLA only 2 percent when inflation seemed higher?

COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures inflation from the third quarter of one year to the third quarter of the next. The 2018 COLA reflected inflation between mid-2016 and mid-2017, a period when energy prices were stable and overall inflation was modest. Inflation you may have noticed in other areas or at other times is not captured in that specific measurement period.

If I was working and earning over the earnings test limit, did the 2018 COLA affect me?

Yes, in two ways. First, your SSDI payment itself increased by 2 percent. Second, the earnings test threshold—the amount you can earn before benefits are reduced—also increased. In 2018, the threshold rose to $17,040 for the year (or $4,260 in months before the year you reach full retirement age). The higher threshold gave working beneficiaries more room to earn without a benefit reduction.

Did Medicare Part B premiums increase in 2018?

No. Medicare Part B premiums were held flat at $134 per month in 2018, the same as 2017. This was due to the hold-harmless provision, which prevents premiums from rising faster than Social Security benefits. As a result, many beneficiaries saw no net increase in take-home income despite the 2 percent COLA.

How does the 2018 COLA compare to what I might receive in future years?

COLA amounts vary year to year based on inflation. The 2018 figure of 2 percent was modest compared to some years but higher than the zero adjustments from 2009 to 2015. Future COLA amounts depend on inflation data and cannot be predicted in advance. You can check the Social Security Administration website each December for the announcement of the following year's COLA.