Is Your Social Security Benefit Keeping Up With Rising Costs? Probably Not

Is Your Social Security Benefit Keeping Up With Rising Costs? Probably Not

About half of participants in TSCL’s 2018 Senior Survey confirm that, after the deduction for their rising Medicare Part B premiums in 2018, they were left with no boost to their net Social Security benefit, or one that was so small that they had less than $5.00 per month left over to deal with all other rising household costs.

New research released by The Senior Citizens League found that cost of living adjustments (COLAs) are not protecting retirees from rising healthcare costs, even during periods of below-average inflation.  In 2018 with a 2% COLA, retirees with a Social Security benefit of as much as $1,288 per month found that the entire boost was taken by rising Part B premiums.  After deducting for increased Part B premiums, that left little or nothing left over for other rising costs like home heating oil, food costs, especially for fresh fruits and vegetables, and out-of-pocket medical costs.

In recent years roughly 70% of all beneficiaries have been affected by the triggering of the Social Security “hold harmless” provision.  When the Medicare Part B premium increases more than the amount of the individual’s COLA, this special provision of law can be triggered.  The hold harmless provision protects retirees’ Social Security benefits from being reduced when the dollar amount of an individual’s annual COLA increase is not sufficient to cover the increase in the Medicare Part B premium.

Normally, the hold harmless provision normally affects only a tiny number of beneficiaries in any given year.  Since 2010, however, the hold harmless provision has been triggered on a nationwide basis an unprecedented four times.  This occurred when inflation was so low that no COLA was payable in 2010, 2011, 2016, and a COLA of just 0.3 percent was paid in 2017.

While hold harmless provides valuable protection from reductions in benefits due to rising Part B costs, low inflation and high Medicare costs, nevertheless, restrict the growth of net Social Security benefits.  This occurs when Part B increases offset the entire COLA as it did for half of all Social Security recipients in 2018.  This leaves less Social Security income to cover all other rising costs, and people must spend more of their retirement savings or  andgo into debt.

According to TSCL’s study, the triggering of hold harmless will continue on an individual basis, particularly when inflation is lower than forecast (about 2.4 percent), or if Medicare Part B premium increases are higher than forecast (5%), or both.  According to the report, individuals with the lowest benefits, $490 or less, are the most likely to be affected by hold harmless on an individual basis over the next decade, even in years when a COLA is payable, particularly if Medicare Part B premium increases are higher than expected.

TSCL supports legislation that would calculate the COLA using an index that’s more representative of retiree spending, the Consumer Price Index for Elderly Consumers (CPI-E).  What are your fastest growing costs?  We’d like to hear from you!  Contact us by email.