Feb 15, 2020 4 min read

Social Security is a very important part of people’s retirement plans. It is one of few retirement assets that have a cost-of-living index.

For 2020, checks went up 1.6%. This is less than the historic averages, which are closer to 2.5%. Most people, however, will not see much of the increase because Medicare Part B premiums went up 6.7% to $144.60 per month.

Under the hold-harmless rule, if Medicare premiums increase by more than the cost-of-living adjustment, the premiums are held at the amount covered so that people’s SS checks are not reduced. For instance, if someone’s SS benefit is $1,500, the COLA would give them $24 more per month. This would be more than enough to cover the $9.10 increase in Part B premium.

The extra income from the cost-of-living increase, however, is $14.90, or 0.99%. Like all health care costs, Part B premiums have been increasing much faster than general inflation. Since 2010, COLAs have grown by 15.2 percent, while Medicare Part B premiums have increased by 44.5%.

The country is facing Social Security challenges. At projected rates, the SS Trust Fund will run out of money in 2034. We faced this same situation in 1985. That was solved by changes made in 1983, when the tax was increased on both workers and employers. The age to reach full retirement was changed from 65 to what we have today at ages between 66 and 67. Also at that time, up to 50% of your SS became taxable.

It is important that SS stop being a political football. People have worked and paid into the system their whole lifetimes, so they deserve to receive their benefit. There needs to be some adjustments, and the sooner the better.

Social Security and Medicare consume close to 55% of the federal budget. Many things have changed in the country since SS was introduced. One is life expectancies have gone way up. People are collecting checks for decades. This may require some adjustment in ages. People are collecting for many more years of benefits.

There are some politicians who are proposing increasing benefits from Social Security. When this consumes such a large percent of the budget and there are already challenges, how is this possible? It sounds great to promise to increase benefits and have free college education and all these other campaign promises. The question is how we afford this when the deficit is growing so quickly.

Visit the website www.usdebtclock.org. Let’s find ways to solve problems and not create larger ones. We owe that to future generations.

A somewhat related dilemma exists when people are considering retirement, people who have worked 30 or 40 years and would like to quit their jobs. If these people are in their early 60s and start their SS, they may be giving up 25 to 30% of their future SS benefits. If they are not 65 or older, they may not qualify for Medicare. This can make health care expenses unaffordable.

This situation requires balancing short-term pleasure with long-term reality. If you have to consume your savings early, there is less to spend later.

These are choices that must be made. Unfortunately, there are not always easy answers to our own personal finances and those of the country. To accomplish either, we have to be realistic, control debt and know we often do not get 100% of what we want. Let’s make the best choices possible.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.