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3.6% Social Security Boost May Be Lost to Medicare Hike

The 55 million people who receive Social Security are getting a 3.6% raise — unfortunately, a good chunk of the increase is likely to be offset by anticipated hikes to Medicare B premiums.

Though this raise — the first in two years — is certainly welcome news to retirees facing battered nest eggs and slumping houses prices, Medicare Part B premiums, which cover medically-necessary services like doctors’ services, outpatient care, home health services — may rise just as much.

“For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare premiums,” the Social Security Administration conceded in making the announcement this morning. The specifics on these higher premiums will be released in the next few weeks, experts say.

The 2012 cost of living adjustment, or COLA, is the first increase in two years. For a senior who gets Social Security checks of $15,000 per year, this would amount to $540 more per year or $45 more per month.

The increase results from inflation is going up: The consumer price index, which measures the cost of buying things like food and transportation and is used to track inflation, rose significantly this year.

One other change: As a result of the increase, the maximum amount earnings subject to the Social Security tax will increase to $110,100 from $106,800.


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.