Healthcare costs have been a long-standing challenge for US retirees. Estimates show that the average retired couple at 65 could spend north of $300,000 on healthcare expenses in retirement. Meanwhile, the average retirement savings for married couples aged between 65 and 74 is around $609,230. Millions of retirees depend on their monthly Social Security checks to get by, and many receive smaller checks because they claimed benefits too early, primarily due to health or financial issues. While the maximum monthly benefit for retirees claiming Social Security at full retirement age in 2025 is over $4,000, the average monthly benefit was $1,787.08 in October.
The Social Security Administration (SSA) estimated that claiming Social Security benefits at 62 could reduce your monthly income by 30% compared to those claiming at the full retirement age, which is 67 for those born after 1960. As seniors navigate rising living costs, they face an uphill battle since Medicare Part B costs are set to increase by 5.9% next year, exceeding the 3.2% inflation growth this year through October and the annual Social Security income hike of 2.5% for 2025.
Increasing Program Costs And Heightened Medicare Usage By Seniors
Medicare Part B covers healthcare costs like doctor consultations, limited outpatient prescription drugs, medical equipment for home use, ambulance services, and even for the treatment of mental disorders. Medicare Part B costs seniors $174.70 monthly, but the Centers for Medicare and Medicaid Services (CMS) said the rate will increase by $10.30 to $185 per month in 2025. CMS believes the higher costs for Medicare Part B coverage are due to the program's rising costs and projections of higher coverage usage by seniors. The 5.9% hike in healthcare costs is higher than the Social Security cost-of-living-adjustment (COLA) announced by the SSA, which is 2.5% for 2025. Given that Social Security is a crucial income source for tens of millions of US retirees, higher Medicare costs could mean seniors will be compelled to allocate more from their Social Security checks to healthcare, further straining their budgets. The increased Part B premiums will be cut from Social Security checks starting January 2025.
"When Part B premiums grow at a faster rate than COLA uplifts, [healthcare] costs consume a growing portion of monthly Social Security checks," independent Medicare analyst Mary Johnson told USA Today.
The Situation Isn't Surprising
The 2.5% COLA is the lowest in years and is expected to increase monthly checks by an average of $50 to $1,976 next year. These annual hikes are based on the Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W) data, which tracks the price changes workers pay for everyday consumer goods and services. Experts believe the low hike is due to the rapid cooling of the annual US inflation rate, from 3.5% in March to 2.4% in September. However, inflation increased again in October to 2.6%, which could introduce more uncertainty about whether the COLA hike would be enough for seniors to manage their living expenses moving forward.
It is important to know that Medicare Part B premiums have exceeded annual Social Security COLA hikes for decades. Medicare Part B payments increased by an average of 5.5% annually between 2005 and 2024, while COLAs averaged 2.6% in the same tenure. Johnson said that disparity is because Medicare expenses aren't included in the consumer price index, which is used to calculate the annual COLAs. The new Medicare costs come after seniors expressed disappointment over the 2025 Social Security COLA, highlighting how the hike is barely enough to tackle living costs after years of extremely high inflation levels.
