The Social Security and Medicare Rule Many Seniors Learn Too Late

Medicare premiums are withdrawn from Social Security checks for most retirees.

When Medicare premiums change, this can reduce the value of your annual Social Security raise.

Social Security and Medicare are two very important programs seniors rely on. Unfortunately, many older Americans don't fully realize how Social Security and Medicare work, or how they interact, and this could lead to costly surprises in their retirement years.

To ensure that you're making retirement plans based on the facts, you must know one key Social Security and Medicare rule.

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The key thing that future (and current) retirees must understand is that most seniors have Medicare premiums taken directly from their Social Security checks. And if Medicare premiums increase, as they do most years, that increase can eat up some or all of the annual Social Security cost-of-living adjustment (COLA) that many seniors collect.

See, Social Security has COLAs built into it to ensure benefits keep pace with inflation . These COLAs result in benefits increasing in most but not all years. However, Medicare premiums also increase in most but not all years. And when those premiums go up, seniors don't end up getting the full amount of extra money they were expecting from the COLA because a lot of it goes to covering their extra Medicare costs.

In 2017, for example, there was a 0.3% COLA. But Medicare premiums rose by more than that amount, eating up the raise retirees expected to collect.