Our Safe Spending Amount will at least increase by 2% for 2018.
Posted on October 16, 2017

Last week the Social Security Administration announced a 2.0% increase for inflation (COLA or Cost-of-Living Adjustment) for 2018. What’s this mean for me and for you?

1. Social Security payments will increase by 2% starting in January. That’s the increase before the deduction of spending for Medicare Part B Premiums. (The Part B Premium is a health insurance payment toward a portion of Medicare’s cost of doctor’s visits and other outpatient services.) That spending deduction will be announced later. Those of us receiving Social Security may not see a net increase of 2%.

2. Those of us who follow the CORE principles in Nest Egg Care will see an increase of our Safe Spending Amount (SSA) from our Nest Egg of at least 2%. (That’s just to maintain the same spending power in 2018 as it was in 2017.)

So far, cross our fingers, it looks like every retiree – no matter their age – will see an increase in their SSA of more than 2% if they follow the CORE principles in Nest Egg Care – a real pay increase. That’s because the 12-month return – over a wide range of Stock and Bond mixes – will be such that our portfolio will be significantly greater than it was after last year’s deduction of SSA for spending in 2017. (This could be the second year in a row that retirees – no matter their age – will have a real SSA “pay increase.”)

My friend Alice, who recalculates based on the 12-month return results ending October 31, tells me that the 12-month return rate on her portfolio – ending September 30 – is 13.8%. While she doesn’t exactly know the result for October 31, it almost certainly looks like she’ll have a greater portfolio even before her deduction of SSA for her 2017 spending last November. She’ll have “more than enough” for her current SSA.  She’ll also be applying a greater SSR% than she did last November: she’s one year older. The combination of the two effects means she should wind up with much more than a 2% increase for 2018 .