COLA

Social Security Benefit increase for 2023

14Oct

What the Social Security 2023 Increase Means for You Now and Later

BlogOctober 14, 2022

The Social Security Administration announced that there will be an 8.7% cost-of-living-adjustment (COLA) beginning January 2023. Overall, this means benefits will increase an average of $140 a month.

The COLA rate is determined by the consumer price index (CPI) which relies on the U.S. inflation rate. While many thought 2022 COLA increase (5.9%) was large, the 2023 increase of 8.7% is the largest since 1981. Here is a quick breakdown of how Social Security benefits will change: For the average Social Security recipient an extra $1752 will be seen yearly, increasing benefits on average from $1681 to $1827. The average couple receiving benefits will see a yearly increase of $2856.

However, this increase does not factor in taxes. The one who giveth will also taketh. Under current law, if you are a single taxpayer, you will be taxed 0% on your Social Security benefits if you have provisional income under $25,000. Your Social Security benefits can be taxed up to 50% if your provisional income is between $25,000-34,000; and up to 85% can be taxed if your provisional income is over $34,000.

For those married and filing jointly, provisional income less than $32,000 results in zero taxation on your Social Security benefits. Between $25,000-44,000 your benefits can be taxed up to 50%; and from provisional income over $44,000 up to 85% of your benefits can be taxed.

Today, the Social Security Administration reports that roughly half of Social Security beneficiaries pay taxes on their benefits. With the COLA increase of 8.7%, more could be paying taxes in 2023. And depending on which state you live in, you may be paying more tax at both the federal and state level when it comes to taxes on your Social Security benefits.

COLA increases are always giving long-term. Once you reach 62, the increases are automatically included into your benefits. Heedless of when you take them, the increases are cumulative meaning the next COLA increase is determined off the new “base” Social Security benefits. This means even for spousal, survivor, or divorce benefits, you will still receive the COLA increases no matter when you enroll.

13Oct

2023 Means Savings on Medicare

BlogOctober 13, 2022

Medicare beneficiaries will pay lower Part B premiums for coverage come 2023. Those who are paying these premiums need to be aware of two major changes.

For this upcoming year, the premium for Part B will decrease by 3% to $164.90. The annual deductible will also decrease from $233 to $226 for 2023.

Sometimes people do not know they are paying their Part B premiums because when you elect to enroll in Medicare, your premiums come directly out of your Social Security benefits.

Moreover, since CMS regulates Medicare Part D, even though the prescription coverage is sold by private insurances, there is a good chance that many will see a general decrease in Part D premiums, too. Unfortunately, since the private insurers set the terms and limits of these policies, there is not set amount for the decrease like Part B has. CMS is predicted that an almost 2% decrease may happen for Part D. If there is a change to your plan, you will receive a statement in the mail notifying you. If you do not receive any statement, please call your insurance directly or check online.

Lastly, another major change CMS announced were changes to income brackets and rates for the premium surtax for Medicare. This surtax is known as income-related monthly adjustment amount (IRMAA). This is in addition for higher income beneficiaries to the Part B base premium of $164.90 everyone pays. This also is an addition to Part D premiums for higher income beneficiaries.

This surtax is imposed on modified adjusted gross incomes starting at $97,000 for a single person and $194,000 for married couples who file a joint return and maxes out at $500,000 of MAGI for a single person and $750,000 for a married couple fling a joint return. The maximum Part B premium if you hit the top income limits would be $560.50. For Part D the imposed surtax would be an additional maximum of $76.40. It is important to note that the highest bracket ($500,000/$750,000) discussed here is not adjusted for inflation, but the lower brackets are. So over time, more and more people will be moved into the top bracket and will pay the higher Medicare Part B premiums due to inflation.