Healthcare Costs Are Rising Faster Than Your Social Security Check. Here's What Retirees Can Do.

Inflation makes things cost more money over time. This is a known fact. For this reason, Social Security benefits are eligible for a cost-of-living adjustment, or COLA, every year.

It used to be that lawmakers had to vote in Social Security COLAs. Now, those raises happen automatically based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers.

The problem, though, is that Social Security COLAs often end up trailing inflation despite being designed to keep up with it. A big reason is that healthcare costs tend to rise at a faster rate than broad inflation. Since Social Security recipients tend to spend a lot of their income on healthcare, that puts them at a disadvantage.

Just look at what happened with Medicare this year. The standard monthly Part B premium rose almost 9.7%, from $185 last year to $202.90 this year. Social Security benefits, meanwhile, got a mere 2.8% COLA.

But even though Social Security COLAs don’t tend to hold up well to rising healthcare costs, that doesn’t mean recipients are doomed. Here’s what to do if you’re worried about keeping up.

Delay your benefit claim

You’re eligible for your Social Security benefits without a reduction at full retirement age, which is 67 for anyone born in 1960 or later. But for each year you delay your claim past full retirement age, your benefits get an 8% boost, up until age 70.

That doesn’t just give you larger monthly checks to work with. It also gives you more protection against inflation. The more money you’re entitled to each month in Social Security, the more money every COLA that comes through should put in your pocket.

Remember, when the cost of Medicare Part B rises, that increase happens universally. But when you have larger benefits to begin with, you stand to end up with a larger net COLA during periods when Part B increases a lot.

Invest in assets that can outpace inflation

You shouldn’t just rely on Social Security to help you keep up with rising healthcare costs. Instead, plan to supplement those monthly checks with distributions from an investment portfolio. If you split your portfolio between stocks and bonds, your money is likely to grow over time thanks to the stock portion, while the bond portion can provide you with predictable income.

Of course, building a retirement portfolio is something you should plan to do over the course of your career. You don’t want to wait until you’re within a few years of retirement to start saving for it. If you fund an IRA or 401(k) consistently over several decades, you might manage to grow a series of small monthly contributions into a large sum of money over time.

While you may not have much control over rising healthcare costs, you’re not doomed to fall behind. The key is to claim Social Security strategically and also rely on savings and investments to help you maintain your buying power.