Social security recipients will receive a tiny 0.2% increase in their monthly benefit amount in 2017 due to a cost of living adjustment (COLA). For the average person, whose monthly benefit is roughly $1,034, this amounts to about a $2.60 per month increase, allowing purchase of an extra gallon of milk or one loaf of white bread; or preferably, if one were to follow my recommendation, 3 Fast Break chocolate bars, which is one of my personal favorite candies (rough prices were computed at my local supermarket — prices may vary depending on locale). There was no COLA in 2016, the third time in four decades in which that occurred.
The social security COLA is tied to the Consumer Price Index (CPI), which uses a basket of goods (not to be mistaken for a basket of deplorables) to determine the inflation rate. Because overall inflation has been relatively flat in recent years, the COLA has followed suit.
However, this poses a potential problem for some higher earning social security recipients. The reason for this is that the cost of the Medicare Part B premium continues to rise rapidly. Medicare Part B pays for doctor’s bills, as well as costs for some other care providers. Its cost will increase to $149 per month in 2017, a sharp increase from its 2016 cost of $121.80 and its 2015 cost of $104.90.
Most social security recipients pay a monthly premium for Medicare Part B coverage. This includes most recipients who are enrolled in a Medicare Supplement plan, or in Medicare Advantage. The Medicare Part B premium is typically withheld directly from a recipient’s monthly social security benefit amount. However, because of a hold harmless law, the increase falls disproportionately on retirees with higher incomes. Statistics from the Center for Budget and Policy Priorities show that about 33% of retirees rely primarily on social security for the vast majority of their retirement income. And, interestingly, because Medicare Part B are means tested, about 70% of Medicare recipients are exempt from the increases, leaving the remaining 30% to foot the entire bill for the increase.
Currently, if your modified adjusted gross income is between $85,000 and $107,000 (or between $170,000 and $214,000 for a joint return), you pay $170.50 per month for Medicare Part B. If your modified AGI is $214,000 or higher ($428,00 for a joint return), your monthly premium is $389.80. These amounts will go up in 2017.
In an era of low overall inflation but rising costs of medical care, this disparity may continue to grow. Whether and how to deal with this issue on a macroeconomic policy level is above my pay grade and beyond the scope of this modest blog post. But it is at the very least an issue worth thinking about. On an individual level, those retirees affected most by the rising costs of Medicare may wish to consult a personal financial advisor with special knowledge of Medicare issues.
Much of the information for this post was gleaned from a post on the Street dot com: https://www.thestreet.com/story/13741637/1/will-your-social-security-check-plummet-in-2017.html (visited September 17, 2016).
This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.