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In retirement Social Security, for many, will be good portion of their income, but with federal laws on the books, your Social Security benefit may not be what you think it should be.

The little unknown secret about retirement is that in order to receive your Social Security benefit you must enroll into Medicare in order to get itthat is federal law.

It may sound like a no-brainer, but, unfortunately, Medicare is not free. The other issue: the bulk of your Medicare premiums are deducted directly from your Social Security benefit – that is also law.

The problem is that Medicare premiums have been, historically, inflating by over 6 percent while Social Security benefits will adjust through the cost of living adjustment (COLA) by a maximum of 2.6%.

Because of these laws as well as future rates of inflation, for most retirees, their Social Security benefit will never increase at all through retirement.

To highlight an example:

For a 55-year-old person earning $60,000.00 a year in wages and planning on retiring at age 67, their expected Social Security benefit is projected to be about $33,552.00, according to Social Security’s Quick Calculator.

At the same time their Medicare Part B and Part D premiums are expected to be close to $5,100.00.

The result: Medicare premiums will consume about 15.25% of their Social Security benefit at age 67.

Unfortunately, this issue only compounds as they get older:

At age 75 their take home Social Security benefit will be by reduced Medicare premiums by roughly 22%.  By age 85 the reduction of that take-home Social Security benefit will be just over 34%.

The graph below details what this person should expect in terms of their Social Security benefit throughout retirement:

The reality of retirement is that your Social Security benefit may not be what you think it should be.

The time to discuss a plan of action with your financial professional in order to generate income through investing or purchasing an Annuity is now.

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