There’s still more bad news for the millions of recipients of Social Security and Medicare Part B. Aside from the fact that there was no increase in the Social Security pension this year, the latest news says that federal retirees and Social Security recipients will only receive a 0.3 percent increase in 2017. This trend, counting next year’s, will be the fifth year (consecutive) that seniors in the U.S. will be receiving very low raises.
The federal government says the low increase is due to low inflation, partly because the prices of fuel are low. The new cost of living adjustment (COLA) was announced Tuesday. According to the law, the COLA’s basis is the consumer prices founded on a government measure. About 1 in 5 Americans or over 70 million people are affected by the COLA.
Effect on seniors’ lifestyle
On the average, a Social Security pension recipient receives $1,238 each month. The projected increase for next year effectively adds less than $4 monthly to a senior’s pension. Another thing that will compound the situation is the premiums for Medicare Part B. Normally, this is deducted from the Social Security payments. With the expected increase in premium payment of Medicare Part B, whatever increase the pensioner will receive next year will most likely go to the healthcare premium. This technically means that Social Security pensioners who are fully dependent on their monthly benefit will still be struggling
By law, there is a “hold harmless” provision to protect most Medicare recipients. The provision states that the increase in Medicare premium must not go beyond the Social Security COLA. However, there is also a ruling that this provision is not applicable to retirees who have a high income as well as new enrollees. Therefore, they are going to pay higher premium, which they will know by the end of the year.
On the losing end
The latest developments add to the never ending woes of retirees, disabled workers and veterans, as well as their survivors who depend on Social Security benefits. The only time that the COLA was above 2 percent was in 2011. There were also years when there was no COLA increase. A member of the Senior Citizens League, Mary Johnson says that many people are digging through their retirement savings at a faster rate.
While the prices of gas today are lower, seniors who do not drive that much cannot get its full benefit, said American Institute for Economic Research senior fellow Max Gulker. Instead, more seniors are spending their retirement income on healthcare expenses.
The September inflation report showed that gasoline prices last year fell by 6 percent. However, medical care costs went up by over 5 percent over the same period.On the political front, Democratic presidential candidate Hillary Clinton has taken up the idea of providing expanded benefits, which will target low-income retirees by raising taxes on Americans who are high-earners. Republican presidential candidate Donald Trump on the other hand said that he is not going to cut benefits but was vague as usual about his action plans for it.
There are more problems ahead. Next year, close to 173 million workers are going to pay Social Security taxes wherein 12 million will pay higher taxes due to a higher cap.