Who likes to drink in the COLA? It depends who you talk to…

No, not talking about the soft drink. The COLA we are talking about here is the Cost Of Living Adjustments on Social Security benefits for the upcoming 2016 year

 

Recently the Social Security Administration (SSA) announced there would be no adjustment to benefits based on a measure called the CPI-W based on changes from 14Q3 through 15Q3. And, because during this time, there was no increase in CPI-W then, by law, there can be no COLA for 2016.

Regardless of the technicalities of the reason, it is obvious why retirees do not like to drink this flavor of COLA: no increase in money in their checks.

But what about current workers toward the higher end of the wage spectrum? What do they care? Actually, these folks relish the idea of forgoing COLA. Why? Because in years when there is no COLA, then the Social Security Wage Base also cannot be raised, and thus will remain at its current level of $118,500 through 2016 as well.

Workers pay 6.2% in OASDI (aka “Social Security”) taxes up to the Wage Base amount, but not over that amount. Prior to the upcoming lack of increase for 2016, the Wage Base had increased each of the 4 prior cycles, and 7 of the last previously. So, understandably, higher wage earners view this lack of COLA (and a stagnant Wage Base) as a refreshing drink they will enjoy sipping…

Author: Ben Hall, ChFC, AIF®

VP & Managing Director – JKJ Retirement Services

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