Social Security beneficiaries are getting a raise in 2020. The raise comes courtesy of cost-of-living adjustments, or COLAs. These adjustments are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is the metric used to determine if expenses are rising.

While it's good news for seniors that benefits are going up -- as annual raises aren't guaranteed to occur -- unfortunately, the raise Social Security recipients will receive isn't going to be as big as it seems at first glance. That's because the value of the raise will be offset by rising premiums for Medicare. 

A Social Security card and dollar bills

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Rising Medicare premiums cut into your Social Security raise

The COLA for seniors in 2020 will result in a 1.6% increase in Social Security benefits. For seniors receiving the average Social Security benefit of $1,461 per month in 2019, that raise seems like it should amount to about a $23 increase in monthly checks.

However, for most Social Security recipients, Medicare Part B premiums are automatically withdrawn from Social Security checks, and those premiums are also going up in 2020. For retirees paying the standard monthly premium -- which is most retirees -- monthly costs are rising from $135.50 in 2019 to $144.60 in 2020. 

The $9.10 increase in Medicare premiums will reduce that average $23 monthly raise down to just $13.90, taking away almost half of the value of the COLA. Medicare Part B's deductible is also going up $13, rising to $198 from $185 -- which mean seniors who use services will need to shell out a little more cash for their care. 

Social Security benefits are losing buying power

Retirees disappointed about their small raises -- especially after accounting for rising Medicare costs -- have plenty to be concerned about when it comes to making their Social Security checks stretch far enough. 

Since 2010, there have been three years when the COLAs were 0, and another six years when they were 2% or below, including the 2020 COLA. The raises aren't sufficient to keep pace with the increase in costs in the areas where seniors tend to spend the most, including housing and healthcare. 

Small COLAs coupled with rising healthcare and other costs have contributed to Social Security benefits losing a third of their buying power since 2000. Seniors are simply not getting big enough raises to maintain their standard of living. 

One big reason for this is that CPI-W isn't a very accurate measure of how prices increase for the elderly, who are neither clerical workers nor urban wage earners. Proposals have been made to switch to a different index for tracking rising costs of living for seniors, but they've largely gone nowhere. And because the Social Security trust fund is expected to run out in 2035, a cut in benefits is more likely than an increase unless reforms are passed into law. 

Coping with smaller Social Security raises

If you're already retired and count on Social Security raises to help you maintain your standard of living, you may need to look for ways to scale down your spending -- especially as rising Medicare premiums cut into benefits increases while prices continue to rise on the things on which you spend the most money.

Make sure you explore Medigap plans and Medicare Advantage plans to align your coverage to your healthcare needs, and look closely at your budget to see if there are cuts you can make. Finally, be sure you know what your raise will actually be -- after accounting for your rising Medicare premiums -- so you don't expect a bigger boost in income than the one actually coming your way.