Jill on Money: Social Security: The No-COLA
Sunday, December 27, 2015

By Jill Schlesinger
Tribune Content Agency
 There will be no raise for Social Security recipients next year and one of the nation's retirees (aka my Mom) responded to the bad news with an expected comment: "that stinks!" I had to explain to her that because the government uses inflation data to calculate the cost-of-living adjustment (COLA) for Social Security and overall prices were essentially flat from a year ago, she, along with over 60 million Americans who currently receive Social Security retirement benefits, will not get a bump in pay next year. That means most seniors will be stuck with an average monthly check of $1,341 ($2,212 for retired couples who are both receiving benefits).
  The average annual COLA increase has been 4.1 percent over the past 40 years, but 2016 marks only the third time in all of those years that the government has held Social Security benefits flat - and all three instances have occurred since 2010. You can blame the Great Recession for the trifecta of no COLA increases, because one consequence of an imploding credit and housing market is that it pushes down prices for a variety of most goods and services.
  Usually consumers are happy when prices are stagnant or falling. For example, the energy portion of the Consumer Price Index (CPI) fell 4.7 percent in September, led lower by plunging gas prices, as well as lower oil, electricity and natural gas prices. But as much as many seniors may be delighted about lower energy costs, they are likely driving a lot less than they used to when they were working and commuting. Meanwhile, the area where seniors may be more sensitive to price increases is health care costs.
  According to PwC's Health Research Institute (HRI), which has been tracking medical cost trends for a decade, health care spending is expected to increase by 6.5 percent for 2016. "After likely changes in benefit plan design, such as higher deductibles and co-pays, the net growth rate is expected to be two percentage points lower," but 4.5 percent is still more than two times the core CPI (inflation without food and energy) reading of a 1.9 percent increase from a year ago.
  If you plan on retiring next year, there is more sobering news: The maximum Social Security payment for a 66-year-old worker in 2016 will be $2,639 per month, down $24 from 2015. This is a bit of a Catch 22: while there is no cost-of-living adjustment for next year, there is an increase in the national average wage index, which accounts for the drop.
  Just about the only good news for retirees has to do with Medicare. The No-COLA triggers a legal provision that prevents Medicare premiums from increasing faster than Social Security payments for about 70 percent of existing beneficiaries. That means most seniors will see monthly premiums of $104.90 for Medicare Part B in 2016. That said, those who will enroll in Part B next year, but don't yet receive Social Security, as well as high-income beneficiaries, may pay nearly $160 per month, 52 percent more for those same benefits.
  If the news for retirees is not so hot, things look a little brighter for current workers. Because inflation is muted, there is no change in the maximum amount of earnings subject to payroll (FICA) tax. Workers and employers must pay into the system up to $118,500 of wages, but for those who earn more than that threshold, no additional Social Security tax is due.
  As a reminder, the government's website can be helpful in navigating Social Security and Medicare. You need to create a "My Social Security" account (http://www.socialsecurity.gov/myaccount/), which allows you to review your earnings history, project estimated benefits and make changes to your direct deposit information. If you really want to talk to a human being, you can also go to a Social Security field office (https://secure.ssa.gov/ICON/main.jsp).
Contact Jill Schlesinger, senior business analyst for CBS News, at askjill@JillonMoney.com.
This column was printed in the December 27, 2015 - January 9, 2016 edition.

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