For the third time in 40 years, Social Security recipients will not receive a benefit increase for 2016. Recent low gas prices have kept the consumer price index (used to determine cost-of-living adjustments) relatively constant. At first glance, a flat inflation rate would seem to cancel the effects of stagnant benefits. However, there is more to the story for roughly 7 million Americans who may pay 52 to 100 percent more for their Medicare Part B as a result.
Here’s why. Most Social Security beneficiaries have their Part B premiums deducted from their Social Security payment. Typically, the annual cost-of-living increase covers a hike in premiums. When that is not the case, a federal “hold harmless” law protects these recipients from reduced payments.
This leaves the remaining 30 percent of beneficiaries to shoulder the difference. Included in this group are new beneficiaries, Medicare enrollees who are not drawing their Social Security, those billed directly for their Part B premium and people who pay a higher premium because of their income. According to a recent CNBC report, individuals in this group who are now paying $104.90 per month may soon be paying $159.30. For higher income beneficiaries, premiums could rise from $223.00 per month to $509.80.
If you are among those facing higher premiums, there may still be some things you can do to avoid that scenario – provided you act quickly and aren’t subject to a high income threshold. If you are drawing Social Security benefits now, submit a request to have your Part B premium deducted from your check. If you are on Medicare but haven’t started receiving Social Security, you may want to consider filing for it now. Receiving both Social Security and Medicare by the end of the year should make you eligible for “hold harmless” protection for 2016. (Generally, filing a month in advance is sufficient.)
Of course, you will need to weigh prospective Medicare savings against the higher earning potential of delaying Social Security benefits – bearing in mind next year’s excess premiums are likely to unwind themselves when cost-of-living increases return.
If you or someone you know is concerned about maximizing Social Security benefits and minimizing Medicare costs, we’d be happy to help. Call for Denver Investment Advice, Jordan Dechtman at 303-741-9772, email him at Jordan@JordanDechtman.com or visit our website www.JordanDechtman.com to schedule an appointment.
Written by Securities America for distribution by Jordan Dechtman.