The Social Security Administration recently announced that for 2016 there would be no “cost of living adjustment” (COLA) to retirement payments. The reason is simple, congress set the COLA based on performance of the Consumer Price Index (CPI).
The CPI failed to grow enough to trigger the COLA for those of us on social security. In the past 40 years, this has only happened 3 times.
In one sense this is good, it means that inflation is very low and the cost of daily living is still affordable. If you have been to the grocery store lately you and I will agree that the cost of food has been skyrocketing. How can the CPI still say there is no real cost in living expenses? The answer is simple, during the Clinton Administration; food was removed from the calculation for the CPI Index.
The CPI does not track food expenses nor energy expenses, they are both exempted categories form the CPI.
What else is increasing in costs beginning in 2016? Amazingly the cost of Part B Medicare insurance is increasing by 7.8%. The cost of going to your doctor is going to cost you more for insurance and out of pocket.
As we all known the cost of medical care expenses is also sky-rocketing. NO, actually it is not, last year the overall cost of medical care expense increases was only 5.8%. And yet, with no COLA, the cost for insurance ourselves increased more than the actual cost for medical services.
According to a recent report from the Center for Retirement Research at Boston College it points out the difference in insurance and true costs is a significant difference and may be a financial burden for many retirees.
Retirees on fixed income may find it more and more difficult to maintain a standard of living that exists beyond the poverty level.
Here is a link to the report from the Center for Retirement Research: http://crr.bc.edu/briefs/no-social-security-cola-causes-medicare-flap/