iStock_000016561786_SmallRetirees generally look forward to January, when they almost always receive a cost of living adjustment (COLA) for their benefits. But for the third time in history, that won’t be happening this year. That’s because COLA is tied to the Consumer Price Index, which measured an inflation rate near zero for 2015. No inflation means no increase on your checks.

How does this affect you and your retirement? Read on for answers.

Your Social Security checks won’t increase this year. This is the most obvious consequence of the lack of COLA this year, but it’s worth discussing in more detail. Most retirees depend upon a combination of Social Security and their own retirement savings to cover their expenses once they stop working. If your retirement plan distributions are relatively fixed, then you hope for COLA to offset increases in the cost of living. The Consumer Price Index might say inflation was flat last year, but that might not translate into flat expenses for you personally. If your out-of-pocket health care spending increased, for example, then your budget is feeling a pinch.

You might be tempted to take more out of your retirement account. If you really needed a bit more income for 2016, you might be tempted to increase your retirement plan withdrawals. Of course, that can backfire later on, if you live longer than expected.

Your Medicare premiums might increase. If you pay your Medicare premiums out of pocket, or if you receive Medicare while delaying your Social Security benefits, your premiums are going up this year. That’s bad news if you’re on a fixed budget.

Some pensions tie their increases to Social Security’s COLA. Some pension plan administrators base pension raises on COLA. If there is no COLA during a particular year, pensioners on that plan also do not get a raise. So for those people, the lack of a COLA packs a double punch.

Those are the four main ways the lack of a COLA could affect retirees in 2016. However, even those who are not yet retired should pay attention to this news. It’s a good lesson in retirement planning: Don’t count on Social Security to fund too much of your retirement! Call us to schedule an appointment, and we can talk about different methods of establishing a flexible retirement income.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.