Good news for Social Security, Medicare enrollees
Most Americans have felt the impact of inflation, especially in the price of groceries, heating fuel, gasoline and other life essentials. For those of us who are fortunate enough to qualify for Social Security, this budgetary stress has been alleviated to some extent by benefit increases in 2023.
In 1975, cost-of-living adjustments (COLA) were made automatic for Social Security beneficiaries based on the Consumer Price Index. The COLA for 2023 is an 8.7% increase. Only three times, going back to the great inflationary period of 1979-1981, have inflation rates been more severe than 2022.
The 8.7% COLA increased the average monthly benefit to $1,827 in 2023, which was an increase of $146 per month from 2022. The maximum retirement benefit of an individual who retired in 2023 is $3,627 per month.
Fortunately, no action is required on your part in order to obtain these benefits. If you are 62 or older and eligible to receive a Social Security benefit, you will receive the 8.7% increase. Social Security has already sent out notices to beneficiaries indicating updated benefits starting in 2023. If you haven’t received a notice, you should contact Social Security at 1-800772-1213.
As I have indicated in previous columns, individuals who reach their full retirement age (FRA) can increase their benefits by 8% per year by delaying applying for benefits up to age 70. Moreover, your surviving spouse would also receive an increase in her/his survivor benefit. In other words, if you postpone applying for benefits up to age 70, your surviving spouse would be eligible to receive 100% of your age 70 Social Security benefit as a survivor benefit. (Note: A survivor benefit is not paid in addition to the benefit a surviving spouse has earned based on his/ her own work record under Social Security. The surviving spouse is only eligible to receive whichever amount is higher.)
There also have been favorable changes to Medicare in 2023. Specifically, Medicare premiums have decreased slightly, and there have been improvements in access to enrollment.
Most Medicare beneficiaries will pay the standard Part B (medical insurance) premium of $164.90 per month in 2023. In 2022, the premium was $170.10 per month.
Many Medicare beneficiaries pay more than the standard Part B premium. Single beneficiaries with income of $97,000 or more and married couples with income of $194,000 or more pay a surcharge called an income-related monthly adjustment, or IRMAA.
This surcharge is based on your tax return from two years ago. So, your surcharge for 2023, if any, is based on your tax return from 2021. The income is based on your modified adjusted gross income (MAGI). This includes your adjusted gross income plus tax-exempt interest from municipal bonds. In 2023, surcharges range from an additional $65.90 per month to an additional $395.60 per month.
Starting in January 2023, individuals who enroll in the later months of their initial enrollment period have coverage from the first day of the month after enrollment. You can sign up for Part A (hospital insurance) and/or Part B during the seven-month period that begins before the month you turn 65, includes the month you turn 65, and ends three months after the month you turn 65.
If you enroll in Medicare one to three months before your 65th birthday, your Part B coverage starts the month you reach 65. If you enroll during your birthday month or in the one to three months following, your coverage will begin the first day of the month after you sign up.
If you don’t enroll in Part B during your initial enrollment period, you may be subject to delayed enrollment penalties unless you are covered by a group health insurance plan from your or your spouse’s current employer.
If you want to learn the details of Social Security regulations, I recommend Mary Beth Franklin’s ebook “Maximizing Social Security Benefits,” which can be found at MaximizingSocialSecurityBenefits.com