Dan McGrath: Average Social Security Benefit Set to Decrease by $14

Retirees who are receiving Social Security benefits and are enrolled in Medicare may stand to lose more than $14 a month under a very specific and looming financial scenario, warns Dan McGrath, co-founder of Jester Financial Technologies.

The latest report from the Medicare Board of Trustees is calling for Medicare Part premiums to inflate by 22.3 percent, increasing the Part B premium to $149 per month from $121.80 per month in 2016, McGrath wrote for CNBC.com.

At the same time, the Social Security Board of Trustees is also calling for a 0.2 percent cost-of-living adjustment (COLA) in 2017 for retirees who are receiving Social Security benefits. “For the average retiree who is collecting the average Social Security benefit of $1,335 per month, this COLA increase means their Social Security benefit will rise by $2.67 a month,” for a grand total of $1,337.67.

“The issue for retirees is that their Medicare Part B premium is automatically deducted from any Social Security benefit they receive. And with this COLA and somewhat large Medicare Part B increase, their take-home income from Social Security will be decreased,” McGrath warned.

“Thankfully, though, there is a federal regulation known as the Hold Harmless Act, which states that a retiree receiving Social Security benefits and also earning under the national average of income and enrolled in Medicare cannot see their Social Security benefit decreased by increases in Medicare Part B premiums,” he said, explaining this is what happened this year for many retirees.

"The real question that should be on everyone's mind is what retirees are going to do when they find out that their Social Security benefit was decreased by an expense that is required for them to bear in order to even be able to collect that benefit," he asked.

In 2016 the Medicare Part B premium was increased by 16.1 percent, to $121.80 per month, from $104.90 per month in 2015. Social Security did not issue a COLA in 2015, so those retirees who qualified (about 70 percent of them) received protection under the Hold Harmless Act, and their Medicare Part B premium thankfully remained at $104.90 per month.

Now, with this recommendation of an increase of Medicare Part B premiums for 2017, if Social Security issues a 0.2 percent increase, these 70 percent of retirees will be protected by the Hold Harmless Act and thus their Medicare Part B premium will only inflate by 16.1 percent, to $121.80 per month.

Since those that were enrolled in Medicare prior to 2016 have already been held harmless in 2016 due to increases from 2015, these retirees will automatically have their Medicare Part B premiums set at the 2016 Part B premiums in 2017, which is $121.80 a month.

This means the average retiree receiving Social Security (SS) will actually see their benefit decrease by $14.23 a month. What had left retirees with $1,230.10 ($1,335 monthly SS minus $104.90 Medicare) will now leave them with $1,215.87 ($1,337.67 SS minus $121.80).

However, the missing $15 might end up being the least of retirees' financial problems if Newsmax Finance Insider David Stockman's gloomy prediction comes true.

"Measured by the only thing that matters — hard cash income and outgo — the Social Security system has already gone bust. What’s more, even under the White House’s rosy scenario budget forecasts, general fund outlays will exceed general revenues (excluding payroll taxes) by $8 trillion over the next 12 years," he recently wrote.

"Stated differently, the OASDI (Old-Age, Survivors, and Disability Insurance) trust funds could be empty as soon as 2026, thereby triggering a devastating 33% across the board cut in benefits to affluent duffers living on Florida golf courses and destitute widows alike."

(Newsmax wire services contributed to this report).