Social Security Beneficiaries May Get a Double Whammy

Social Security beneficiaries usually see their monthly benefits increase once a year, based on the cost of living escalators. These have usually been in the range of 1-4% per year. That could change in the next 3 years.

With the current state of the economy, the Congressional Budget Office projects an actual decline in consumer price indexes and expects no inflation for the next few years. The office has stated that there may not be any cost-of-living increase in Social Security benefits until possibly 2013.

The vast majority of Social Security beneficiaries have their premium for Medicare Part B and to a lesser extent, Part D, deducted from their monthly Social Security benefits. These premiums are projected to continue to go up.

The net result is that it is quite possible that Social Security checks will actually be smaller starting in 2010 as compared to 2009. This projected decrease will impact about one quarter of the retirees, including those recently signed up for Medicare as well as higher income beneficiaries.

The other three quarters of the Social Security beneficiaries are protected by a “hold harmless provision”, which prevents Medicare Part B premiums from increasing in any year by more than that specific years cost-of-living increase. If there is no bump in Social Security benefits, the Medicare Part B premiums will stay the same. There is no such protection with Part D premiums.

Currently Medicare Part B premiums are $96.40 a month. The Congressional Budget Office predicts the premiums to be $119 in 2010, $123 in 2011, and $1028 in 2012. There is no premium for Medicare Part A.

None of the insurance carriers that provide Medicare Part D prescription drug coverage have indicated premium increases in 2010. However if it’s anything like past years are an indication we can continue to expect higher Part D premiums.

If you currently have in Medicare Part D plan it is critical that you reevaluate which Part D program is best for you between November 15th and December 31st each year. Premiums for the various plans change as well as deductibles and co-pays. Your prescription medicines might be different this year versus last year and the various different programs change the cost-effective drugs.

The long and the short of it is that if you are on Social Security, between deflation, Medicare Part B and D premiums, don’t be looking for your Social Security check going up in the next year or two.

About the author

Michael Chamberlain, CFP®

Hello. My name is Michael Chamberlain CFP®, the principal of Chamberlain Financial Planning and Wealth Management. Our firm is “fee-only” with offices in Sacramento, Campbell and Santa Cruz California. “Serving clients from the mountains to the sea.”

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