No Cost-of-Living Increase for Social Security in 2016
Author: Sara Yen
For the third time in seven years, Social Security recipients will not see a cost of living increase to their monthly checks. The latest news from the Social Security Administration hasn’t been well-received by 65 million retirees, disabled workers, and their families who rely on Social Security benefits for day-to-day living expenses.
While benefits remain flat...
The Consumer Price Index for “Urban Wage Earners and Clerical Workers” (CPI-W), is the metric the Department of Labor uses to calculate cost-of-living increases. It estimates inflation in the cost of a variety of goods and services, including food and beverages, housing, clothing, airfare, gasoline, medical care, TVs, toys, pet products, college tuition, telephone services, personal services, and funeral expenses. As gasoline prices have declined over the past year and continue to remain low, so has the CPI-W. Overall the CPI-W was flat from the third quarter of 2014 to the third quarter of 2015, which means no adjustment to benefits in 2016.
...watch for rising Medicare Part B Premiums
It doesn’t seem to make sense, does it? Another downside to no cost-of-living adjustment is the potential for outpatient care premiums for Medicare Part B to more than triple for some retirees. In years when Social Security benefits rise, increases in premiums are covered. In years when benefits remain flat, there is a “hold harmless” law that protects about 70 percent of Social Security recipients from having their benefits reduced due to premium increases. However, the other 30 percent of recipients, including those new to Medicare, federal retirees who aren’t eligible to receive Social Security benefits, and those who make more than $85,000 a year, could see their premiums soar—some estimates predict they could go from $54 per month to $159 per month.
Possible change on the horizon.
Senior advocate groups argue that the CPI-W is a poor metric for adjusting benefits since it measures the spending of “urban wage earners and clerical workers” who drive more and spend less on medical expenses than retirees. They want benefits to be tied to the CPI-E (CPI-Elderly), which takes into consideration the spending habits of retirees. In fact, a bill has been introduced that would change the metric for calculating cost of living adjustments to Social Security benefits from the CPI-W to the CPI-E. Unfortunately, this being the year before a presidential election year, only time will tell if the bill will gain any traction. Perhaps it will take pressure from millions of unhappy seniors to sway the representatives in Washington make changes.