Offset Reflects Growing Trend of Health-Related Expenditures Consuming Retirement Income

WASHINGTON, D.C. - The Insured Retirement Institute (IRI) stated that today's announcement of a 1.7 percent Social Security cost of living adjustment (COLA) for 2013, combined with a looming Medicare Part B premium increase, reflects a worrisome trend of health-related costs consuming a larger share of retirement resources.

Following the release of Consumer Price Index data by the Department of Labor's Bureau of Labor Statistics, the Social Security Administration announced today that benefits will increase by 1.7 percent to reflect a higher cost of living in 2013. Despite the increase, most Social Security recipients may not receive bigger benefit checks as the increase could be mostly offset by higher Medicare Part B premiums, which typically are deducted from Social Security benefits. Part B premium costs for 2013 will be announced in the near future, but estimates show an increase is on the horizon. The 2012 Medicare Trustees Report projected an increase of more than nine percent.

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. 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.

"This reflects the growing trend of health-related expenses eating into retirement income," IRI President and CEO Cathy Weatherford said. "The cost of health care 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 percent of Baby Boomers expect Social Security to be a major source of retirement income.  The same study also found that only 37 percent of Baby 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.

About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry.  Today, IRI is considered to be the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. IRI proudly leads a national consumer education coalition of nearly twenty organizations and is the only association that represents the entire supply chain of insured retirement strategies: Our members are the major insurers, asset managers, broker dealers, and more than 150,000 financial professionals. IRI exists to vigorously promote consumer confidence in the value and viability of insured retirement strategies, bringing together the interests of the industry, financial advisors and consumers under one umbrella. IRI's mission is to: encourage industry adherence to highest ethical principles; promote better understanding of the insured retirement value proposition; develop and promote best practice standards to improve value delivery; and advocate before public policy makers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit www.IRIonline.org today to experience the vast resources of the Insured Retirement Institute for yourself.     

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