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Answers to readers' questions on Social Security COLAs and Medicare

Robert Powell, Special for USA TODAY
The Social Security COLA announcement is set for Oct. 15.

Q: I understand the Social Security Administration (SSA) has yet to make a final decision on its COLA adjustments; is that correct? I am thinking of applying for Social Security in January of 2016 with an effective date of Feb. 16. Consequently, it appears I should apply this year. I understand that I would have to be actively enrolled in both November and December of this year to be held harmless. I will fall into the higher income bracket for premiums. When I look at the modified adjusted gross income calculation, do I add tax-free interest? — Robert Smith, Dallas

A: Stacy Sanders, the federal policy direct at the Medicare Rights Center in Washington, D.C., says the cost of living adjustment (COLA) should be released on Oct. 15, shortly after the Bureau of Labor Statistics releases its inflation report for September 2015.

The Social Security Administration has yet to make a final decision on this adjustment; but it’s unlikely there will be a COLA in 2016, says Sanders.

As for whether you apply for Social Security in January of 2016 with an effective date of Feb. 16, Sanders says the following: “You will protected by the ‘hold harmless’ provision and will not have to pay the higher Part B premium in 2016 as long as you are receiving Social Security benefits and are enrolled in Medicare in both November and December 2015, you have the Part B premium deducted from your Social Security benefit, and you do not have annual income greater than $85,000 for an individual and $170,000 for a couple. However, it is important to note that if there is a COLA increase you will have to pay any increase in the Part B premium up to the amount of the COLA increase.”

Sanders also recommends that those considering taking Social Security benefits earlier than anticipated to avoid the anticipated increases in the Part B premiums should carefully weigh the costs and benefits of this choice and are strongly encouraged to speak with someone at the Social Security Administration (SSA) about how this will affect their Social Security earnings for the future.

Medicare Part B premiums to rise 52% for 7 million enrollees

And, yes, your understanding is correct: You would have to be actively enrolled in both November and December of this year to be held harmless.

According to Sanders, your modified adjusted gross income is your total adjusted gross income and tax-exempt interest income. Read Medicare Premiums: Rules For Higher-Income Beneficiaries.

Q: I turn 65 in February of 2016. I read your article pertaining to a 50% increase in premiums for new Medicare recipients. Since the new Medicare 2016 premiums are not available yet, is there a chance that Medicare will surprise us with no increase or at least a substantial reduction from the 50% you’re reporting? — Danny Pinkston, Huntsville, Ala.

A: It will take action by Congress, the Department of Health and Human Services or both to limit the increase for the 2016 premium. “Both entities are currently working on a solution, and we should know more soon,” says Sanders.

Q: I read your article related to Part B premiums if there is no COLA for those who are currently paying Medicare premiums and not receiving Social Security. I'm age 68 and pay $104.90 per month, and based on your article my premiums could go up to about $159 if I don't receive Social Security before the end of the year. I called the Social Security Administration (SSA) to confirm if I would be affected if I chose to continue to postpone receiving Social Security for another year. They said your article was wrong and there is no provision to discriminate against those who pay for Medicare and postpone their Social Security benefits. The call ended with the proverbial "trust me."

I believe the information in your article is correct and am looking for something in the Social Security regulations, laws and the like that I can point to. I 'm scared to death that I'll have to pay the higher premiums by deferring Social Security, yet the SSA says I won't. 

 Can you give me a direct reference in the SSA’s regulations, laws and the like that can help me clear this up? I don't have much time to apply and receive Social Security by the end of the year. Tom Getchman, St Louis, Mo.

A: The article was correct. You’ll want to read 42 U.S. Code § 1395r - Amount of premiums for individuals enrolled under this part and Compilation Of The Social Security Laws.

That said, don’t let the Part B premium decide whether and when to take Social Security.

“Any individual considering taking Social Security benefits to avoid the projected increase in the Part B premiums should carefully weigh the benefits and costs,” says Sanders. “Taking Social Security retirement benefits earlier than anticipated may result in lower benefits over the course of one’s lifetime. Individuals considering this course of action should speak to an expert about how their lifetime benefits may be affected.”

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Emailrpowell@allthingsretirement.com.

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