No Cost of Living Adjustment for Social Security Recipients

Tips for Coping with No COLA

No Cost of Living Adjustment for Social Security Recipients
November 11, 2015

As a senior on limited income, it is a good thing for you when inflation is low and prices are not rising...isn't it? In general, yes, but there is a downside to extremely low inflation.

Social Security checks are given a Cost-Of-Living adjustment (COLA) each year based on the overall rate of inflation. No inflation, no COLA increase — and that happened this year for just the third time in forty years. Thanks to the negligible inflation in 2015 as calculated by the Consumer Price Index (CPI), there will be no COLA increase in 2016 Social Security checks.

Seniors are understandably upset, especially those who are heavily or completely dependent on Social Security for their income. According to AARP, around half of all seniors count on Social Security for half of their income, and Social Security makes up at least 90% of the income for 25% of seniors.

It sounds reasonable that if there is no inflation, an increase should not matter, but inflation is calculated in a broad sense and does not necessarily correlate to the expenses of seniors. The CPI flattened mainly because of steep drops in gas prices. Other costs that are more important to seniors increased over the last year. Housing costs are up 3.7%, medical costs are up 2.4% and food prices rose by 1.6%. Prescription drugs have gone up by approximately 11%.

The medical costs are a major concern, as seniors spend about 15% of their income on medical-related expenses. For those 30% of Medicare beneficiaries who will see Part B premiums rise 52%, the lack of a COLA is a potentially health-threatening situation.

What can seniors do when faced with a year without a COLA?

  • Review Expenses – You probably cannot do much to change your medical expenses except to keep up with healthy habits. It is at least worth reviewing your lifestyle to see if you can kill two birds with one stone. Cutting down on excessive smoking or drinking could decrease your medical costs and save money at the same time.

Look over other expenses to see where you can trim — eating out less often, cutting out one entertainment option per month, etc. The small things add up quickly.

  • Review Assets – Do you have any assets you are not using that you might sell? Anything from knick-knacks and heirlooms to old coin collections could help. It is relatively easy to sell almost anything on eBay these days.

You can also consider your largest asset — your home — and ways that you can free up your equity via a reverse mortgage, refinancing, or downsizing.

  • Consider Other Short-Term Income – Look over any investments to see if you are being too conservative. Adjust your investments to riskier, higher-earning nest eggs if you can handle the increased chances of making a loss. Take advantage of any part-time work opportunities or consider more working hours if you are in semi-retirement.
  • Start/Stop Your Benefits – If you have suspended benefits, consider reinstating them for November and December 2015 and suspending them again in January 2016. This trick can help you avoid a Medicare Part B increase. You can make both requests at the same time to avoid forgetting to restart your benefits.
  • Make Your Voice Heard – Write to your Congressman to make sure that your voice is heard. It will not help you this year, but it is important to keep pushing for change.

For example, there is another inflation index known as CPI-E that is weighted to reflect the expenses of the elderly better. The CPI-E is still considered experimental, but it would represent inflation in a much better way as it relates to Social Security checks. Demand that the Social Security Administration switch to CPI-E for future COLA determinations.

It may be a rough 2016 for seniors, but with a little planning and trimming, you can ride it out as smoothly as possible. Cut where you can, but do not skimp on your health, and do not forget to make your point to your elected officials. A few changes at the legislative level could go a long way to helping seniors in the future.


Photo ©iStock.com/skynesher

  Conversation   |   12 Comments

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Tina | 11.11.15 @ 19:00
These are great tips for anyone, but especially seniors.
Carla Truett | 11.11.15 @ 19:01
We have to take better care of our elderly. This makes me sad.
Erin | 11.11.15 @ 19:02
It seems that if they've been paying into their entire lives they should fat enough back to be able to live in.
Sarah | 11.11.15 @ 19:02
Well that's unfortunate. Good to know so we can be prepared to help my grandma if needed.
Jonathan | 11.11.15 @ 19:04
These are great tips, but if you're living on SS alone anyways, your budget was probably already stretched.
Steffanie | 11.11.15 @ 19:04
Great tips for the elderly and those who help them.
Wanda Langley | 11.11.15 @ 19:05
This is not good News for Seniors. If it were not for my Siblings and I my Dad could not afford his Medications and he does not splurge on anything.
Nancy | 11.11.15 @ 19:06
Great tips for people who have these options. Unfortunately, too many of our seniors rely on just SS to get by. Additionally, many prescription drugs are either no longer being covered or the prices are going up.
Blake | 11.11.15 @ 19:10
It's very disheartening to hear how expenses are calculated for seniors as a whole based on a broad view of the economy
Stokes | 11.11.15 @ 19:10
Great info for seniors.
Jo Ann | 11.11.15 @ 19:15
Well the raise i got last year was $15.00 per month, My rent got raised $20.00 because I live in government subsidized housing. So my raise cost me $5.00 per month. No one in Congress wants Seniors to do anything but die. So don't give us what we worked for. And my subsidized housing cost me over half of my social security check per month.
jccomanchero | 11.25.15 @ 19:10
Would it be better to down size on your house if it needs a lot of fixing to do with it. What if you can't get a good price on it would you still be better off selling it and find a more compatible house with out All the extra rooms and I ground pool we spent a lot of money on that pool last year we had a pool liner and we also had it swapped to salt water pool it is a big I ground pool its 4 ft deep on shallow end and it is 11.5 ft deep end its a diving pool. Would I be better off finding me a two bedroom two bath house with some land and with a double garage ?
$commenter.renderDisplayableName() | 12.06.16 @ 05:56
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