By Mary Johnson, editor
The number of retirees reporting that Medicare costs are consuming more than one-third of their Social Security benefits appears to be growing more rapidly than experts ever expected. This has big implications for whether Social Security benefits can adequately cover retirees’ basic monthly household expenses over the course of a retirement — and retirees are forced to spend through savings more quickly than planned.
In years past, some professional financial advisors suggested that retirees should arrange their budgets so that Social Security would cover most basic monthly expenses like housing, food, transportation and medical expenses. But with the rapid growth in medical costs, coupled with seven unprecedented years of low or no growth in the annual cost-of-living adjustment (COLA), medical costs are taking a bigger share of Social Security payments far sooner than experts ever anticipated.
In 2015, the Medicare Trustees estimated that Medicare Part B and Part D premiums and out-of-pocket costs would take about one-quarter of the average Social Security benefit, an amount they estimated will increase to one-third of the average Social Security benefit by 2089 — some 73 years from now. But according to TSCL’s 2016 Senior Survey, 2089 is almost here. The number of survey participants reporting that they already are spending more than one-third of their Social Security benefit on healthcare costs jumped from 29% in 2014, to almost half, 47% by the start of 2016. If we have another year with a low or even no COLA next year — and the risk is high that we will — we are likely to see a majority of Social Security recipients reporting that Medicare costs are taking one-third or more of their monthly payments as early as next year.
Today’s retirees simply can’t expect to live on Social Security alone in retirement anymore because it will be needed to cover an increasing share of medical costs over the course of a retirement. According to a new report by Health View Services, age 65 females who retired in 2015 and live to 89 can expect to spend $208,266 in premiums and cost sharing, and age 65 males who live to age 87 will spend $186,688. Yet a June 2015 report from the Government Accountability Office found that average Americans between the ages of 55 and 64 have accrued about $104,000 in retirement savings, like an IRA or 401 (k) and about one-half of them have no retirement savings at all.
Finding solutions to control the growth in rising healthcare costs continues to elude the experts -- not to mention lawmakers. But Congress can do something about the lack of a 2016 COLA by enacting the SAVE Benefits Act (S. 2251) introduced by Senator Elizabeth Warren (MA) and (H.R. 4144) introduced by Representative Tammy Duckworth (IL-8). The legislation would provide 70 million older Americans with roughly a $580 emergency COLA. The bill would fund the benefit boost by eliminating a tax loophole used to shield corporate compensation of the highest paid CEO’s from taxes.
There’s still time for Congress to take action, and you can help. Tell your elected Members of Congress that you don’t just want action — you expect it! To send an email to your Members of Congress and learn more about the status of the SAVE Act, visit www.SeniorsLeague.org.