The 3.2% cost of living adjustment reflects another year of high inflation. However, we now know we'll be paying almost 6% more for Medicare Part B!
That doesn't mean you'll see a smaller Social Security check in January, but if you're wondering how this will affect you, in this video we will walk through these questions:
- Does the COLA affect when we should claim our Social Security benefits?
- How does this jump in the cost of Medicare Part B affect my Social Security check? What about IRMAA?
- Does this change anything from a tax standpoint?
- Does this COLA increase affect the program's insolvency?
If you have any questions about when you should claim Social Security or how to pay for Medicare, please reach out to Ryan for a complimentary consultation by calling 714-462-9155 or reach out by going to contact page by clicking here.
Erin: Ryan, good to see you. We have big news for Social Security. The COLA has jumped 3.2%, but Medicare Part B has jumped 5.9%. So the cost of living adjustment reflects another year of high inflation, but we now know we'll be paying almost 6% more for Medicare Part B. Does this mean that we're going to see a smaller Social security check come January?
Ryan: No, it doesn't and I'm glad that you asked that. This is a common area of confusion right now. Here's the example. So let's say that you have a social security check for a thousand dollars and you're getting that 3.2% increase. Keep in mind that's going up now $32. The Social Security is only going up, or I'm sorry, the Medicare is only going up about nine or $10, so that's very likely going to offset what you have to pay for the additional Medicare. And a lot of people, their monthly benefit is much higher than a thousand dollars a month.
Erin: Okay, that makes sense. Now you're right though. Those percentages are confusing. Thanks for breaking it down.
Ryan: It is. Yeah.
Erin: This increase in the COLA comes out to about $50 a month for most retirees. Does that affect when we should be claiming our benefits?
Ryan: No, not necessarily. Because remember, again, you'll still get those costs of living adjustments even if you don't go ahead and turn on your Social Security benefits. So the big picture is what makes sense within your overall plan.
Erin: Okay. So 2024 Medicare Part B will be $174 and 70 cents, which is up 5.9%. So this premium usually comes right out of your Social Security check, explain how this works and then how we can prepare for those changes.
Ryan: So if you're receiving Social Security right now and you're on Medicare, that's going to be deducted from your Social security check and more is now going to be deducted again, as we just talked about, your Social Security will increase to help offset that. The other thing to keep in mind here is that most people, their Medicare Part B premium is going to be the 1 74 70, but for many people, if your income is over the limits that you can see here, this is for IRMAA, then you're going to pay this, increase the amount.
Erin: Right. Okay. So of course the next question has to be, does this change affect anything from a tax standpoint?
Ryan: Well, what's interesting when it comes to Social Security and taxes, the provisional income formula that was created back in the 1990s hasn't changed since then. And so what's happening is that these figures right here that you're seeing on your screen, because they haven't changed yet, people's incomes have been going up. Social Security benefits increasing on a monthly basis, and then other income from other income sources increasing as well. What's happening is many people are having to pay more in taxes on their Social Security benefits. Now, keep in mind, if your only source of income is Social Security, you don't have to pay taxes on the federal level, but that other income does cause your Social Security or can cause your Social Security benefits to become taxable. And of course, a couple of years from now, we've got what the Tax Cuts and Jobs Act that's going to sunset. So more and more things that we've got to be planning for tax wise for sure.
Erin: Now, I was surprised to hear that 75% of people, 50 plus worry that social security will run out in their lifetime. Does this COLA increase affect the program's insolvency?
Ryan: Well, I mean it does. Any money that comes out is certainly going to affect the solvency long-term. There's all different types of things that they're looking to do in order to shore up the system long term. But here's the big picture is that you can't just rely on Social Security. You have to make sure that you're contributing to other retirement accounts that you're planning for, making sure that you're going to have the income that you need in retirement and whatever you can do. We want to maximize the Social Security benefit for sure, but ultimately, we don't have control of our friends in Congress and such, make some changes that are less favorable.
Erin: Yeah, really good point, Ryan, this was really helpful to talk through. Claiming Social Security is one thing, creating other income streams in retirement. If somebody wants to talk to you about that, what's the best way to reach you?
Ryan: Could call 714-462-9155 or could just go to the website, CravitzFinancial.com, go to the contact page and submit a message there.
Erin: Alright, Ryan, thank you.
Ryan: Thank you