Many who receive Social Security are hearing COLAs are becoming more unlikely for 2016. Cost of living adjustments, 
or COLAs, are adjustments made to Social Security and supplemental security income in order to ensure the income is in line with other economic influences, such as inflation. They were put into place in 1975 so that those who receive benefits were able to keep up with inflation. Not only that, but for higher income seniors, they could see their benefits decline as the premiums associated with Medicare increase. These premiums are deduced from the Social Security monthly payments.
Updates to Social Security
It’s frustrating, but we won’t know the details until October. Each year, the government releases its Social Security and Medicare Trustees report. This year, it read similarly to what we saw in 2010 and 2011, which are the only two years that Social Security recipients received no bump-up in benefits. Those two years of no COLAs was followed by a 3.6% hike for 2012, and more modest increases of 1.7% in 2013, 1.5% in 2014 and 1.7% in 2015.
The Role of Medicare Part B
Typically, Medicare Part B premiums are deducted from monthly Social Security benefits. If you’re a recipient, odds are this year, you’re paying $104.90 per month for Medicare B, which covers your outpatient services and doctor visits. This is true unless you’re deemed a high-income retiree with a Modified Adjusted Gross Income over $85,000 or for married couples, $170,000 or more. You pay higher monthly premiums not only for Medicare B, but for Medicare D as well. For 2016, the report reveals a projected 52 percent increase on premiums for Part B. You’re already in the higher bracket and aren’t protected from the SSA’s hold harmless provision that ensures most Social Security beneficiaries don’t have to pay higher increases in Part B premiums than what they receive via COLA increases. So, not only where there be no COLA increase, but those in higher income brackets also will not get the benefit of the hold harmless provision. For most beneficiaries, the absence of COLA ensures they don’t face a double whammy of a premium hike in Medicare – with two exceptions:
Individuals who are newly entitled to Social Security in 2016
or
Those who are enrolled in Medicare but who have not yet begun receiving Social Security benefits.
While this will likely frustrate many Medicare recipients, there could be other ways of saving, whether through stronger estate planning that could reduce taxes or perhaps other ways of securing medical coverage through other channels. The key is to plan properly so that any of these increases don’t sting when they become effective.
To learn more about Medicare coverage, Social Security benefits and other estate planning options, contact DeBruyckere Law Offices at (603) 894-4141 or (978) 969-0331 today. We can help you make the most of your retirement years.
Daniel DeBruyckere
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