Cost of Living at zero – hard to believe!

Nov 2015

Well, it’s official – the government has determined that inflation is pretty much at zero. So, for the 3rd time since 1975, there will be no cost of living adjustment (COLA) for social security recipients in 2016! You may ask, how does the government make this determination? Well, for most of us, this calculation is a mystery, but the social security website explains it this way:

              -The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation. It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.

2010 and 2011 were the last two years that there was no COLA adjustment, but I am sure you will agree that every year our costs seem to go up. From food at the grocery store, our cell phone bill, cable bill, auto insurance, you name it – costs go up every year to some extent. I think that this is even more so, for seniors. That is because they not only have the basic costs that I just mentioned, but they also have increased medical costs that come with getting older. I would think that our government realizes this, and should come up with a better formula before they determine a zero COLA adjustment!

It is generally a given that health insurance premiums alone go up each year for everyone, including seniors. Even the cheapest Obamacare plan (the Bronze Plan) is estimated to go up 11 percent for non-subsidized consumers in 2016. That is why it is important, for Medicare recipients, to shop for Medicare Part D (prescription drug coverage) and Medicare Part C (Medicare Advantage) plan during the Medicare open enrollment period. Our current open enrollment period ends December 7th. So, if you haven’t shopped around to make sure your current coverage is still cost effective, you should do so before open enrollment ends. You want to make sure that your medical and prescription drug needs will be met with your current plan and also to make sure you are getting the best plan for the lowest cost.

To add salt to the wound, it is estimated that about 1/3 of Medicare recipients will be receiving a Part B premium increase. While this was estimated to go up a whopping 52% in 2016, with the new budget deal hammered out by Congress last week, this increase will go up more gradually. Who get hits with these increases? Individuals with modified adjusted gross income (MAGI) of over $85k and married filing joint couples with MAGI over $170k; individuals who receive social security but pay their Medicare part B premiums directly to Medicare; individuals who pay permanent penalties because they signed up late for Part B; and, persons who are not yet enrolled in Medicare Part B, but will sign up in 2016.

If you are receiving social security and will be hit with some or all of the increases I have mentioned, now would be a good time to review your expenses and make sure you have enough income coming in or you might have to make some budget cuts in 2016!

Good Luck!

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