On August 14, 1935 President Franklin D. Roosevelt signed the 37 page Social Security Act into law, ushering in a new concept of retirement for millions of Americans. But even as the Social Security program celebrates its 80th birthday, retirees will likely be receiving a nasty surprise this year.
The latest annual report from the Social Security trustees is projecting no COLA (cost-of-living adjustment) increase for Social Security benefits for 2016. This would be only the third time in the past 40 years that there will be no COLA increase. Cost-of-living adjustments are determined by comparing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) inflation index in the third quarter of the year with the previous year’s measure. One of the big contributors to the index’s decline is the collapse of oil prices.
As bad as it may be for some seniors with no COLA increase this year, the news gets worse for some seniors. Because of how much health care costs are rising, it is looking increasingly likely that Medicare Part B premiums for some seniors may increase by as much as 52 percent!
Not all seniors will see their monthly benefit checks go down because they are protected by a “hold harmless” provision that protects many Social Security recipients from a benefit cut caused by Medicare premium increases. But by most calculations, around 30 percent of Social Security recipients not subject to the “hold harmless” provision are expected to be hit hard by the increase in Medicare costs.
In addition to high-income seniors who aren’t protected from the “hold harmless” provision, enrollees in Medicare who aren’t yet receiving Social Security benefits and new Medicare enrollees in 2016 are expected to be hit especially hard by the Medicare premium increase.
If you have questions or concerns regarding Social Security benefits or Medicare, or how this impacts your financial plan, please call our office at 419-878-3934.