Note on Nov. 12: Final Medicare costs have been announced, which ended up slightly different than the preliminary predictions discussed in this article. See Final Medicare Part Premiums and Deductibles article. See also related article on how current Congressional bill ends the popular Social Security “File and Suspend” strategy for most people not already using this strategy.
October 28, 2015 – It hasn’t happened many times, but it is coming in 2016: there will be no Cost of Living Adjustment (COLA) for those receiving Social Security. That is due to the fact that the cost of living in the U.S. went down, “fueled” by falling energy and commodity prices. This is only the 3rd time in history there has been no COLA. The COLA in 2015 was 1.7%.
This news will undoubtedly disappoint many folks who look forward to a small increase in their monthly Social Security deposit, something they might view as a pay raise every year, although it is really only an adjustment to keep on pace with inflation (which seems to be in check, at least for the present).
Most will dodge a Medicare increase
Meanwhile in the Medicare world, most people will escape a Medicare bullet. Had there been a Social Security COLA increase, Medicare premiums for most recipients would have increased from $104.90 to $120.70. But a hold harmless provision of the law says that if there is no COLA adjustment, premiums for these people can’t go up. As currently estimated, 70% of beneficiaries won’t see any increase. However the Budget bill just passed by the House would reduce that to 15% of those in the program, if it goes on to be approved by the Senate and signed by the President.
The unlucky 15% include higher income beneficiaries and those in certain circumstances. Note that these amounts are not final yet – last minute action could change them. Your premiums will most likely go up if your situation fits these conditions:
– You start receiving Part B in 2016 (your initial Part B premium will be $120.70 per month plus a $3 surcharge)
– Your premiums aren’t deducted from your SS payments (You are eligible for SS, but have delayed claiming. Your initial Part B premium will be $120.70 per month plus a $3 surcharge)
– Your income is over $85,000 (or you are eligible for both Medicaid and Medicare). The amount of your increase depends on your income.
Higher income people’s premiums going up 52% or more
Unless Congress acts (and the bill under current consideration would reduce the number of people affected by this change to 15%) higher income recipients will get the double whammy – no SS increase and a big hike in Medicare premiums. Those could go over 50%, according to Kiplingers. Note: a couple will pay double these amounts if they end up being finalized:
– If a high earning individual’s income is makes over $85,000 to $107,000, the premium will go to $223 from $146.90 monthly.
– For individuals with incomes between $107,000 and $160,000, the new rate is $318.60
– Those with incomes between $160,000 and $214,000 will pay $414.20/month
– The monthly tab for those making up to $214,000 will pay $509.80 per person, up from $335.70 in 2015.
The decision to have no SS COLA in 2016 is set. See the final Medicare costs for 2016 announced in Nov.
For further reading:
What You Don’t Know About Social Security Could Hurt You (3 part series)
Now That You’re 65 – 10 Things You Need to Know (Part 1 in a series – includes how to sign up for Medicare)
Comments: Let us know if you have questions or concerns in the Comments section below.