Each year, retirees who receive Social Security benefits look forward to an announcement about the cost of living adjustment (COLA). This adjustment to Social Security checks helps senior citizens cope with living on a fixed income, as prices continue to rise and strain their budgets.
Unfortunately, there won’t be a COLA this year. For only the third time in history, the Social Security Administration has announced that 2016 benefit checks will remain the same as they were in 2015.
This is because COLA is tied to the Consumer Price Index, which measures the rise in prices of goods and services. This year, the Index reflected an inflation rate near zero, and so the Administration was not able to raise benefit amounts.
How this decision affects you.
Experts often criticize the decision to tie COLA to the Consumer Price Index, because the index heavily weights items like gasoline prices yet offers lees consideration to health care. For retirees who no longer endure a daily commute, gas prices are often less important. And yet, the rising cost of health care affects senior citizens more than any other group.
Many pension plans also tie their benefits to COLA. In years that Social Security checks don’t increase, many pension plans don’t either! That could be a double whammy for retirees who are experiencing rising costs, despite what the Consumer Price Index might say.
Unfortunately, about 30 percent of Medicare recipients will be paying higher premiums this year. And out-of-pocket costs are increasing for everyone.
With your budget potentially seeing more strain than ever this year, it’s important to review your Medicare plan to make sure it still suits you. Supplemental insurance can also help to lower your out-of-pocket expenses. If you’re worried about strain on your budget from rising medical expenses, call our office at (650) 854-8963. We can help you assess your situation and find ways to keep your budget under control.