Social Security raise to average $5

Uncle Sam giveth and Uncle Sam taketh away.

The nation’s 65 million Social Security beneficiaries will receive a paltry 0.3% cost-of-living adjustment to their monthly checks in 2017, the government announced Tuesday. In dollars and cents, it means the average retired beneficiary’s check will rise about $5 to $1,360 per month in 2017.

The even more bitter pill: Many current Medicare beneficiaries won’t be able to spend any of that extra money. Instead, they’ll likely have to send their COLA straight back to Uncle Sam to cover higher Medicare Part B premiums.

Almost a third of Medicare's 56 million beneficiaries could see their premiums jump 22% next year, according to the Medicare Trustees Report, putting the cost at an estimated $149 per month. Those unlucky 30% of beneficiaries include people enrolling in Part B for the first time in 2017, people who are on Medicare but who aren't currently taking Social Security benefits and current enrollees who pay an income-related higher premium.

The remaining 70% of Medicare beneficiaries — now paying $104.90 per month — could see a "small increase" in Part B premiums, the Centers for Medicare & Medicaid Services projects. Part B deductibles are also expected to rise, to $204 in 2017, up from $166 this year. The CMS is expected to disclose Part B premiums later this or next month.

The unequal sharing of higher Medicare costs has to do with how Social Security law is structured, capping premium increases for 70% of current recipients based on the COLA amount and leaving the remaining 30% of people to cover pick up the tab. It's a system that has its critics.

“The people who get treated badly are new retirees and high-income retirees, who don’t get protected by the hold harmless provision,” says Andrew Biggs, a resident scholar at the American Enterprise Institute. "It makes no sense.”

And that’s something that ought to be fixed, he says. Biggs’ proposal: “If there’s inflation, pay a Social Security COLA to make up for it. If there have been cost increases in Medicare Part B or Part D, raise the premiums uniformly so everyone pays their fair share. It’s not that complicated.”

The low COLA for 2017 comes at a time when inflation is starting to rise toward the Federal Reserve Board’s target rate of 2%. And that could create a financial vice grip for seniors: It means the costs of goods and services for seniors, and especially health care, are now rising faster than their incomes.

It could force millions of Americans, many of whom rely solely on Social Security for their incomes, to accept a lower standard of living, increase the risks they take with their investments or to find other sources of income, by going back to work for instance.

Katy Votava, president of Goodcare.com, predicts two things will happen in the wake of Social Security’s COLA announcement: “First, increased confusion and anxiety about what it means for beneficiaries’ pocketbooks. Second, an outcry for a congressional intervention to bring costs down.”


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