For the first time in five years, seniors and retirees will not be receiving an annual raise in Social Security benefits in 2016 due to a decline in inflation driven by falling gas prices. While the Consumer Price Index has fallen over the last year causing the cost-of-living-adjustment (COLA) to remain unchanged, many expenses that retirees face have experienced slight inflation.
Even if the financial impact won’t be felt immediately by the majority of beneficiaries, some retirees, like the 47% of elderly unmarried people who rely on Social Security benefits for almost the entirety of their income, may start seeing the affect on their lifestyle at a more rapid rate.
Many are wondering how to offset rising prices on medical expenses and long-term care without a COLA next year. Here are some ways that you and your family can start preparing now.
Analyze Your Expenses
Start taking control of finances now to determine the best way to reduce spending next year. Some options to consider are downsizing a home, reduce dining out and entertainment expenses, finding more economical means of transportation, and contacting service providers for lower rates on monthly bills.
Be careful to ease into budget cuts so that your loved one isn’t taken back by significant lifestyle changes. The ultimate goal is to help them with finances without jeopardizing their comfort.
Speak With A Financial Planner
Talking with a financial planner can help your family understand some of the ripple effects of a change like this on retirement accounts. For example, some pensions use Social Security’s COLA to determine their own adjustments. Seek out guidance to determine how to offset no COLA without threatening retirement funds and savings accounts.
Consider Other Sources of Income
Some can find that renting property and selling cars or other large household items that are no longer needed are great ways to raise funds.
Another option is helping your loved one find a job that fits their abilities. The U.S. Department of State even has resources for elderly citizens looking for job opportunities.
Speak To Your Policymakers
One of the best ways to incite change is talk to those who can create crucial policies that positively impact retirees and the elderly.
The main argument that many are making about COLA is the Consumer Price Index used to determine increases doesn’t reflect how beneficiaries of Social Security are using their income. Lawmakers are continuing to push for the implementation of a new index that better measures cost of living for the elderly called the CPI-E, including a heavier weight on medical care expenses.
Speaking with your local and state representatives can be a great way to determine how you and your family can help move these initiatives forward.
What About Medicare Part B?
Roughly 70% of Medicare Part B recipients have premiums paid directly from Social Security. For these individuals, there will be no monthly premium increases for 2016 as part of the ‘hold-harmless’ provision of the Social Security Act.
The provision mandates that the dollar increase in Medicare Part B premiums are limited to the dollar increase in an individual’s Social Security benefit. So not only will premiums remain unaffected for these individuals in 2016, any other annual COLA increase will directly offset future premium increases.
While some are working to apply ‘hold-harmless’ to all Medicare beneficiaries, that will not be the case in 2016. New beneficiaries, higher-income beneficiaries, and those whose premiums aren’t deducted from Social Security will be majorly affected. Premium increases are expected to rise by more than 50% next year and these individual now have no COLA to use to help offset those extra costs.
What can your family do about it? Consider helping your loved one apply for Social Security before the premium increase goes into effect or reinstate benefits for the remainder of 2015, but do so with caution. Any changes in Social Security benefits or status could cost money down the line and procedures can become complex quickly. Speak with an elder law attorney with experience in Medicare planning before making any decisions.
If your loved one is one of the 80 million people receiving benefits that won’t receive a cost of living adjustment next year, our elder law attorneys can help your family strategize proper financial planning for retirement. Contact the Law Offices of Christina Lesher, PC today at (713) 529-5900.