Trying to Maintain Balance in the Economic Storm: Social Security Increases Out-Stripped by Medicare Increases

Like the rest of us, retirees have been struggling to keep their financial boats afloat in this economy.  We have all felt the pinch at the gas pump, in the grocery store and with our increased utility costs.  This week, the Social Security Administration announced that it would award a cost-of-living adjustment (COLA) of 1.7 percent to seniors starting in January of 2013. The news is a relief to many retirees who can still recall the two years of 2009 and 2010 when retirees did not receive any cost of living adjustments. While many retirees, especially those on fixed incomes, are likely grateful for the COLA adjustments they will receive next year, it is hardly cause for celebration.  This is why I suggest that retirees have a good financial plan that can provide greater security and stability than the government’s social security COLA adjustments.

Let’s look at how the Social Security Administration calculates new COLA adjustments.  The Bureau of Labor Statistics uses the consumer price index (CPI) to evaluate changes in living expenses such as food, clothing, transportation, energy, housing, medical care, etc. While most have gone up somewhat, the overall cost of living increase is less than two percent.  But many seniors feel this increase far differently than the younger wage earners who are used to compile these statistics because seniors are more affected by increases in health care costs.  Health care costs rose 4.3 percent this last year -  outpacing the 1.7 percent increase in social security benefits.  Add to this the fact that Part B Medicare premiums are expected to rise about 7% for most recipients this year. While most Medicare participants are used to paying $99.90 per month in 2012, higher income participants pay even larger premiums and could see a larger percentage increase in 2013. In either case, on a percentage basis, next year’s Medicare premium increase will likely exceed next year’s social security pay raise. If you are just entering or nearing retirement, and not already doing so, you should be incorporating medical costs and inflation for medical care, into your financial planning.  Secured Retirement Advisors can help.

To help you transition to retirement, we're hosting a special event on November 1 at the Doubletree in St. Louis Park.  We're bringing in guest speakers to discuss a lot of different aspects that you may want to be aware of as you make this transition.  This is open for all readers, but most appropriate for those within five years of retiring or recently retired.

To RSVP for this event, simply visit our website and click on the events section.

Our advisors work with our clients to not only maximize profit potential when the stock markets are doing well, but also protect them from potential financial risks, so that they can continue to spend with confidence in their retirement years. Feel free to visit us at www.securedretirements.com and help yourself to our educational materials.  If you would like a complimentary “3 Step Review” of your own retirement plan, call Secured Retirement Advisors at 952-460-3260.