Some retirees may want to adjust their budget very soon. The Social Security Board of Trustees recently projected that there will be no cost of living adjustment (COLA) increase in 2016 for Social Security. This would only be the third time in the last forty years without an increase. For those seniors who rely on Social Security for their daily living expenses, this will certainly impact their budget. Although this year’s COLA was only 1.5%, it helped offset the increase in food prices and other expenses. For the average Social Security check of $1,200.00, an increase of $18.00 per month is an extra $216 per year – no small amount if Social Security is your primary source of income.
For some seniors, the impact to their budget will be even worse. In addition to not receiving a Social Security increase for 2016, approximately 30% of seniors will likely face significantly higher Medicare premiums. Under federal law, Medicare cannot pass along a Part B premium increase to Social Security recipients that is higher than what they would have received under Social Security’s cost of living adjustment (called the “hold harmless provision”). As a result, Medicare must spread the protected cost increase in doctor visits and other outpatient services to those seniors with higher incomes who do not qualify for hold harmless protection. Medicare is forecasting Part B premiums for those 30% of seniors to increase to $159.30 – a 52% increase!!!
To summarize, seniors are unlikely to see an increase to their Social Security checks in 2016. Most seniors also will not see an increase to their Medicare Part B premiums. If current projections remain unchanged and there is no Social Security increase, seniors with higher incomes will however see their Part B premiums increase by more than 50% – thank you Uncle Sam.
What should seniors do? Higher health care costs – especially long term care costs – should be part of every senior’s budget. Relying on the government to control these costs is a fools game. This is especially true for those seniors with higher incomes as the government never seems to run out of ways to take more of your hard earned assets.