David Lerner Associates: No Social Security COLA Hike in 2016
Retirees who depend on Social Security and Medicare are in for a disappointing year in 2016. According to the Center for Retirement Research, there will be no cost of living allowance (COLA) increase next year. It’s only the third time this has happened in the last 40 years. As a result, there is likely to be an increase in Medicare costs.
However, if your Medicare premiums are withheld from your Social Security benefits and Social Security does not have a cost-of-living adjustment (COLA) for 2016 because of low inflation, you will continue to pay $104.90 per month for Part B. [2] So who will bear the brunt of this increase? Individuals with annual incomes over $85,000, or $170,000 for joint filers, who are not protected by the hold-harmless provision, will pay the higher base amount plus a high-income surcharge. Total monthly premiums for them could range from $223.00 to $509.80 per month, depending on the amount of their income.
If you are a long way from retirement, you may think this information has no relevance for you. Think again. You are going to want to retire one day. The best way to avoid unpredictable ups and down in your retirement income is to provide your own income stream. If you start saving for retirement as early as possible, you won’t be dependent on Social Security alone when it’s time to retire.
Compound interest is what makes long-term saving so effective. And the more time the compound interest has to work, the better off you’ll be. For example, a 20-year old who saves $200 a month until age 65 and earns exactly 6% on saved funds annually would have accumulated around $550,000. But a 40-year old contributing the same amount each month at the same earnings rate would have accumulated only $138,600 by age 65.
Once you have your retirement fund in place, you need to invest it wisely. Speak to an advisor who can help you assess risks and returns and find a sensible middle-ground investment strategy that meets your needs. That way you may not have to worry about COLA adjustments and Medicare increases when you retire.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.