The government announced Thursday there will be no benefit increase next year for millions of Social Security recipients, disabled veterans and federal retirees.
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For a retirement benefit at 62, you need to have earned one quarter of coverage for every year that has passed since age 22, and you need a total of 40 quarters of coverage to qualify (or 10 years of work).
Consider it a drawback to inflation and gas prices staying low.
A few experts argue that based on the way the government tracks inflation, the annual Social Security COLA does not necessarily reflect how most retirees spend their money. The answer comes down to funding Social Security by paying more in taxes or giving out less social security by reducing benefits.
Under current law, however, premiums for the other 30% of beneficiaries-including new enrollees, those who don’t receive Social Security benefits and enrollees with higher incomes-must be raised substantially to compensate. Those not protected include higher income beneficiaries subject to an income-adjusted Part B premium and beneficiaries newly entitled to Part B in 2016. However, they may lose a few of their Social Security benefits.
The reality is this is a test that’s vastly more complicated than others because of the labyrinth of Social Security rules. Retirees did receive a 1.7 percent cost-of-living increase for 2015, a 1.5 percent boost for 2014, a 1.7 percent increase for 2013 and a 3.6 percent bump for 2012. That means that if the Social Security Administration had been using the CPI-E, Social Security recipients would theoretically be getting a raise.
Given that housing represents more than one-third of expenses, older Americans might look for ways to free up the equity in their homes by downsizing or taking out a reverse mortgage, or find ways to decrease their housing costs by exploring such options as home-sharing.
More over, even if the agency had more faith in its elderly inflation measure, it would be up to Congress to change the COLA formula. If prices go up, benefits go up. An estimated 26 million more people would have fallen below the government’s official poverty line previous year without the payments, according to the Census Bureau.
The CPI-W numbers for September were released Thursday. Just 9 percent of consumers believe they are very knowledgeable about how Social Security benefits are determined, and another 38 percent believe they are somewhat knowledgeable about how their benefits will be determined.
But other prices are up.
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The COLA is calculated by comparing consumer prices in July, August and September each year with prices in the same three months from the previous year.
