Retirement costs that won't be rising in 2015

Here's some great news for retirees on fixed budgets that are often stretched by medical expenses. Monthly premiums for Medicare Part B and the related deductible for 2015 will remain the same as in 2013 and 2014, according to a recent announcement from the U.S. Department of Health & Human Services (HHS). It means retirees won't have to spend any of the latest cost of living increase (COLA) in Social Security benefits -- a 1.7 percent rise -- on higher Medicare premiums.

Medicare provides medical insurance for eligible retirees who've attained age 65 and for certain disabled beneficiaries under age 65. The 2015 monthly premium for Medicare Part B -- covering outpatient medical expenses -- will remain at $104.90 per month for most retirees. A higher premium will apply to retirees with incomes above a threshold of $85,000 a year for individual filers and $170,000 a year for joint filers. The annual deductible for Part B remains unchanged at $147 for 2015.

HHS offers this as the reason for the stable premium and deductible:

"Thanks to slower health care cost growth within Medicare since the passage of the Affordable Care Act, next year's Medicare Part B monthly premium will remain unchanged for the second consecutive year. The Affordable Care Act is working to improve affordability and access to quality care for seniors and people with disabilities. The stabilization of Part B premiums is another example of how we are containing health care costs to provide a more sustainable and affordable health delivery system."

According to HHS, "over the past four years, per-capita Medicare spending growth has averaged 0.8 percent annually, much lower than the 3.1 percent annual increase in per capita GDP over the same period."

But some Medicare costs will rise: The Medicare Part A deductible -- covering hospital expenses -- will increase by $44, from $1,216 to $1,260. No premiums are required for retirees who paid FICA taxes for at least 10 years.

The announcement from Social Security about the latest COLA increase reveals that the average Social Security benefit will increase by $22 per month, from $1,306 in 2014 to $1,328 in 2015. The average benefit for a married couple who both receive benefits will increase by $36 per month, from $2,140 to $2,176.

In spite of this good news, retirees who depend solely on Social Security income will most likely still face tough financial challenges in their retirement years. Current retirees will need to manage their spending and consider working a little extra to make ends meet.

Retirees who've attained their full retirement age (66) won't have their Social Security income reduced by employment income. Retirees under 66 are subject to the earnings test, but if their employment income is under $15,720 in 2015, they will have no reduction in their Social Security income. But for every $2 in earnings above this limit, their benefit will be reduced by $1. A more complicated test applies in the year you turn age 66.

All these numbers should help motivate pre-retirees to save as much as possible for their retirement and make smart choices about claiming their Social Security benefits.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.