Contributed by: James Smiertka
You may have already heard, but there will be no Social Security cost-of-living adjustment (COLA) in 2016. This doesn’t happen incredibly often—it’s only the third instance in the past 40 years. Over the past 8 years, the total of annual social security COLA has been only 14.3%, compared to 69.6% in the period from 1975 to 1982. Yearly Social Security COLA depends on the Consumer Price Index as the Social Security Administration states, “monthly Social Security and Supplemental Security Income (SSI) benefits will not automatically increase in 2016 as there was no increase in the Consumer Price Index (CPI-W) from the third quarter of 2014 to the third quarter of 2015”.
The CPI-W value was affected by the significant decrease in the price of gasoline and fluctuations in other areas as well, but as the prices of housing and medical care continue to rise, critics argue that the CPI-W does not accurately reflect the spending of older, retired individuals. Experts argue that the actual cost-of-living for a Social Security beneficiary is increasing as many costs to retirees have increased at a higher rate than the 2.2% average COLA increase since 2000.
It’s known that the lack of a 2016 COLA will impact nearly 70 million people, including retirees, disabled workers, spouses, and children who receive benefits. Some retirees may actually see a drop in their Social Security benefit for 2016 due to the 0% COLA and the potential increase in Medicare Part B premiums (see Matt Trujillo’s blog on Medicare Part B increases for more information).
Everyone’s retirement scenario is unique, and although the 2016 COLA is not likely to have a huge impact, you can contact your financial planner at Center for Financial Planning, Inc. with any questions or concerns about your specific plan.
James Smiertka is a Client Service Associate at Center for Financial Planning, Inc.
This material is being provided for information purposes only. Any opinions are those of James Smiertka and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.
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