It could be belt-tightening time for the nation’s 65 million seniors. For just the third time in four decades, Social Security recipients won't get an annual cost-of-living adjustment.
The announcement Thursday by the Social Security Administration means many older Americans may see a reduced standard of living, particularly 30% of Medicare beneficiaries — an estimated 17 million Americans — who could see their Part B premium and deductible rise 52% because of provisions in the Social Security law.
The decision also introduces a $12 billion complication into already contentious budget talks between Congress and the White House.
The price tag for Congress to protect seniors from the higher Part B premiums and deductibles could be around $10 billion. Plus, states are likely to ask Congress for $2 billion to cover the extra cost of Part B premiums for the 10 million dual Medicare-Medicaid beneficiaries whose premiums are now paid by state Medicaid programs.
Seniors won’t get a cost of living adjustment, known as a COLA, in 2016 because such increases are tied to the general rate of inflation — no inflation, no increase. In the past year, prices for the goods and services used to calculate inflation fell, mostly due to a dip in fuel prices.
While prices on paper may have dropped, experts say the actual cost of living for Social Security beneficiaries is rising and their quality of life is falling. Social Security recipients have lost nearly a fourth of their buying power over the last 15 years, according to the Senior Citizens League. Consider: The cost of housing, often a retiree’s greatest expense, rose 44% since 2000; heating oil, 159%; eggs, 117%; and gasoline, 76%. In contrast, Social Security COLAs averaged just 2.2% per year since 2000, or just 36.3% overall.
“Not having a benefit increase wouldn’t be that big of a deal if the goods retirees consumed had declined in value, on average,” said David Blanchett, head of retirement research at Morningstar Investment Management in Chicago. “This would mean that retirees were actually slightly better off than average. However, since the goods retirees consume have actually increased in price over the last year, it means that retirees are going to be slightly worse off next year vs. this year, since their Social Security retirement benefits aren’t going to be increasing, but their expenses have been.” Click here to continue reading.
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