There will be no cost-of-living adjustment (COLA) for Social Security this year — a precursor of what can be expected for retirement plan contribution and benefit limits.
It's just the third time in 40 years that those Social Security payments will remain flat. All three times have come since 2010.
The main reason for no increase next year is low gas prices, according to published reports. Early projections have already indicated that most contribution and benefits limits won’t increase in 2016.
Almost 60 million retirees, disabled workers, spouses and children get Social Security benefits. The average monthly Social Security payment is $1,224.
Congress enacted automatic increases for Social Security beneficiaries in 1975, when inflation was high and there was a lot of pressure to regularly raise benefits. Since then, increases have averaged 4% a year, according to ABC News.
Some Will Get Less
That lack of increase could mean a decrease in income for some retirees. While most Social Security recipients have their Medicare Part B premiums for outpatient care deducted directly from their Social Security payments — and the annual cost-of-living increase is usually enough to cover any rise in premiums. However, when there is no increase, a long-standing federal “hold harmless” law protects the majority of beneficiaries from having their Social Security payments reduced — and that means that about 30% of Medicare beneficiaries on the hook for a premium increase that otherwise would be spread among all, including 2.8 million new beneficiaries, 1.6 million whose premiums aren't deducted from their Social Security payments, and 3.1 million people with higher incomes, according to the report. For those, the premium bump could be $54 a month — and more for those with higher incomes.
The cost-of-living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education and is calculated by comparing consumer prices in July, August and September each year with prices in the same three months from the previous year.
It's just the third time in 40 years that those Social Security payments will remain flat. All three times have come since 2010.
The main reason for no increase next year is low gas prices, according to published reports. Early projections have already indicated that most contribution and benefits limits won’t increase in 2016.
Almost 60 million retirees, disabled workers, spouses and children get Social Security benefits. The average monthly Social Security payment is $1,224.
Congress enacted automatic increases for Social Security beneficiaries in 1975, when inflation was high and there was a lot of pressure to regularly raise benefits. Since then, increases have averaged 4% a year, according to ABC News.
Some Will Get Less
That lack of increase could mean a decrease in income for some retirees. While most Social Security recipients have their Medicare Part B premiums for outpatient care deducted directly from their Social Security payments — and the annual cost-of-living increase is usually enough to cover any rise in premiums. However, when there is no increase, a long-standing federal “hold harmless” law protects the majority of beneficiaries from having their Social Security payments reduced — and that means that about 30% of Medicare beneficiaries on the hook for a premium increase that otherwise would be spread among all, including 2.8 million new beneficiaries, 1.6 million whose premiums aren't deducted from their Social Security payments, and 3.1 million people with higher incomes, according to the report. For those, the premium bump could be $54 a month — and more for those with higher incomes.
The cost-of-living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education and is calculated by comparing consumer prices in July, August and September each year with prices in the same three months from the previous year.
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