Government: No benefit hike for Social Security next year
WASHINGTON – Older Americans got a double dose of bad news Thursday: There will be no cost-of-living increase in Social Security benefits next year, and Medicare bills are set to soar for many.
It’s just the third time in 40 years that Social Security payments will remain flat. All three times have come since 2010.
The annual cost-of-living adjustment, or COLA, by law is based on a government measure of inflation that was released Thursday. Low gas prices – a boon to all Americans – are driving down consumer prices. Currently the average price of a gallon of regular gasoline is $2.30, about 90 cents less than it was a year ago, according to AAA.
Regardless of inflation, the lack of a COLA isn’t sitting well with many seniors, especially those on a fixed income.
“The price of food has gone up. (The) price of where you live has gone up unless you live in a government-assisted place. Where are you going to get the money to live on?” said Susan Bradshaw, who lives in a retirement community in Atlanta.
The COLA announcement did bring some good tax-related news for high-income workers.
Social Security is financed by a 12.4 percent tax on wages up to $118,500, with half paid by workers and the other half paid by employers. The amount of wages subject to Social Security taxes usually goes up each year. But because there is no COLA, it will remain at $118,500.
But as far as benefits are concerned, the lack of a COLA will affect more than 70 million people, over one-fifth of the nation’s population. Almost 60 million retirees, disabled workers, spouses and children get Social Security benefits. The average monthly payment is $1,224.
It will also trigger a spike in Medicare deductibles and premiums, though dozens of advocacy groups are lobbying Congress to prevent that.
Most Social Security recipients have their Medicare Part B premiums for outpatient care deducted directly from their Social Security payments, and the annual cost-of-living increase is usually enough to cover any rise in premiums. When that doesn’t happen, a long-standing federal “hold harmless” law protects the majority of beneficiaries from having their Social Security payments reduced.