Social Security COLA Could Be Offset by Higher Medicare Premiums: IRI

IRI said in a statement released the same day that Part B premium costs for 2013 will be announced in the near future, but estimates show an increase is on the horizon, with the 2012 Medicare Trustees Report projecting an increase of more than 9%.

"While the majority of Medicare beneficiaries are protected by the hold-harmless provision, which prevents a beneficiary's Social Security check from declining, any offset of the COLA reduces the overall purchasing power of the Social Security benefit, as the increase is designed to keep pace with inflation," IRI says. "Furthermore, the provision does not apply to higher-income individuals and new enrollees, who can expect premiums to consume a larger share of their Social Security checks."

IRI President and CEO Cathy Weatherford said in the same statement that "this reflects the growing trend of health-related expenses eating into retirement income," The cost of health care, she said, "is a real risk that can jeopardize one's retirement security. Now more than ever, consumers need to be aware of how quickly health-related expenditures can decimate retirement savings and develop a plan with a financial advisor that includes a strategy to cover basic living expenses as well as medical expenditures."

According to IRI research, 42% of baby boomers expect Social Security to be a major source of retirement income. The same study also found that only 37% of boomers are confident that they will have enough money to take care of their medical expenses during retirement. A separate IRI study found that cumulative health care expenses including premiums for a healthy 65-year-old male, throughout the remainder of his life, will reach $369,000 on average. For a healthy 65-year-old female, cumulative costs will reach $417,000 on average.