No Social Security cost-of-living adjustment in 2016

As expected, the agency will not raise benefits; meanwhile, millions of retirees face a Medicare premium spike

Oct 15, 2015 @ 9:58 am

By Liz Skinner

Social Security recipients will not receive a benefits boost next year mostly because low gasoline prices have kept inflation too low to spark an automatic cost-of-living adjustment, the government announced Thursday.

“Seniors are very upset because the COLA is based on calculations that don’t take into account their main expenses, which are health care, housing and food,” said Kristine McKinley, owner of Beacon Financial Advisors.

Even worse, as a result of the 0% COLA, some high-income retirees could see their monthly benefits decline because of rising Medicare premiums, which are deducted from Social Security payments each month.

(More: Worst case scenario for Medicare premium hike in 2016)

While the majority of Medicare recipients will continue to pay the same monthly $104.90 base amount for Medicare Part B as they did this year, some beneficiaries' rates could increase as much as 52% starting in January.

The three groups impacted by the Medicare premium hike are retirees whose income tops $85,000 if single or $170,000 if married, new enrollees in Medicare 2016 and anyone who is enrolled in Medicare but not yet receiving Social Security benefits.

Even without knowing what the new Medicare rates will be next year, Ms. McKinley is recommending any of her clients who planned to file and collect Social Security benefits next year, do so by the end of October 2015 so they can start receiving a check in December and not be considered a new enrollee.

“If they were planning to retire next year and collecting then it makes sense to start collecting in 2015 to avoid the higher premiums,” she said.

The AARP and other retiree groups are still hoping to prevent giant increases in Medicare premiums. It's likely to be late November before the Centers for Medicare and Medicaid Services announces how much retirees will pay for their Part B Medicare premiums, which cover a portion of the cost of doctors' visits and other outpatient services.

(Mary Beth Franklin: No Social Security cost-of-living adjustment is bad news for retirees)

The 0% COLA announcement from the Social Security Administration, which had been widely expected, affects 70 million people, about 60 million retirees plus disabled workers and spouses and children who receive benefits.

Those who rely on Social Security for nearly all their income will be most impacted by the lack of an increase, which last occurred in 2010 and 2011. That's not necessarily advisers' clients.

“Our clients shouldn’t have their cash-flow needs so tight that the zero COLA adjustment will make a difference in their lifestyle in retirement,” said Vincent Schiavi, president of Schiavi and Dattani Financial Advisors.

And no COLA increase for 2016 also means the taxable wage base would remain at $118,500 for most workers next year. However, the 1.45% Medicare portion of the payroll tax would continue to apply to all wages, and the 0.9% Medicare surtax would be added for workers with earnings over $200,000 for single filers and $250,000 for joint returns.

The SSA released a fact sheet with additional details.

With reporting from Mary Beth Franklin.


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