Are you prepared to see little increase in your Social Security benefits?

Are you prepared to see little to no increase in your social security income over the next 10 years? The Social Security Administration announced the cost-of-living increase for 2017, and it is a paltry 0.3 percent, which follows last year’s 0 percent increase.

Over the past seven years, the average cost-of-living adjustment (COLA) increase has been 1.2 percent, less than half the average 3 percent increase from 2000 to 2009. I think this trend is going to continue due to low inflation. But here’s the problem: once you turn 65 you also start drawing Medicare, and your Medicare premiums start going up.

However, are Medicare premiums going up or are healthcare premiums the ones that are rising? With Obamacare, there is an average 25 percent increase in Obamacare rates, which isn’t Medicare but is still considered an increased healthcare cost in our system. As a result, your Medicare cost is probably going to go up.

Luckily, there is a hold harmless clause with Social Security if you are having your Medicare premium deducted from your Social Security paycheck. This clause states that your Medicare premium can’t go up more than your Social Security increase. In other words, your net benefit, which is your Social Security minus your Medicare premium, can’t go down. This applies to married couples that make less than $170,000 dollars or single people making less than $85,000 dollars. If you are over those amounts, or are not drawing Social Security, then you are not protected by the hold harmless clause.

Also, your Medicare premium has to be deducted from you Social Security check. This affects us in two ways. One, if you are in that hold harmless clause, this year the Medicare premium is expected to go way up again after last year’s 20 percent increase. We are expecting 25 percent increases to Medicare premiums. After factoring in rising Medicare premiums, along with a .3 percent increase in Social Security benefits, you’re not going to see an increase in your check. I expect to see this as the norm for the bulk of the next 10 years.

Most people aren’t going to see a net increase, but those that are over the $170,000/$85,000 income thresholds are going to see huge Medicare premium increases. They’re talking about the Medicare premiums going up to $149 per month, from $121 last year.

That’s dramatic. What this means is that you aren’t going to see increases in your net Social Security benefit, probably for the next decade. If you have a pension, does the benefit go up with Social Security? In Oak Ridge, the DOE and Y-12, there’s no cost-of-living adjustments. Once you start retirement, it’s never going to go up.

What is your plan to fight the ravages of inflation? To be clear, from ages 65 to 95, you don’t really need to keep up with inflation. Your spending is going to decrease anywhere from 10 to 30 percent from ages 65 to 95. For most of you, it’ll decrease about 20 to 30 percent. So, you don’t necessarily need to stay with inflation but you do need to see some increases in your income. Do you have a plan in place to fight that, understanding that your net Social Security benefit is largely not going to go up within the next 10 years? Be sure you’ve accounted for that in your financial plan because every year things cost more. I call inflation the cholesterol. It’s the silent killer. It inches up year by year, and you wake up 10 years from now and ask “Where is my income going? I’m not making enough money, and I can’t make ends meet.”

Make sure to plan to have increasing income that is reasonably secure as you move forward, especially in this low-inflation environment.