Social Security recipients get a cost-of-living adjustment (COLA) every year that changes their benefits. Usually, this is done to raise their benefits to keep up with inflation.
That being said, if you do not read a lot of news, you might not know about the 2.5% rise this year, which is not a good thing.
This is why the Social Security Administration tells people whose payments have changed every year through a letter. Beneficiaries with My Social Security accounts will be able to see this message online this year as well.
This notice should arrive in the mail to you in December, unless you have turned off paper alerts in your My Social Security Account.
What are some of the new things that this year’s letter will say?
A new 2.5% Cost-of-Living Adjustment
Because of the rise, the average check for retirees, which sits around the $1,907 mark, will get an extra $50 every month. This number will be different based on how much your check is, but it should help you figure out what will happen.
When we look at the 8.7% increase that happened in 2023, 2.5% seems like a small increase compared to other years. However, this could be the start of a good trend toward lowering inflation.
“Although price increases have moderated, it is not as though inflation is over,” says Joe Elsasser, head of Covisum, a software company that helps people claim Social Security.
He warns people not to be too optimistic. Prices and inflation could go up again without much notice.
Medicare Part B monthly costs are going to go up.
The costs for Medicare Part B are going up again this year, which is bad news for people who have signed up for it. Part B covers doctor visits, outpatient hospital stays, some home health services, and durable medical equipment.
This year’s payment of $174.70 went up by only $10.30, so the new $185 per month payment might hurt for many.
Between 2024 and 2025, their yearly expenses will rise from $240 to $257. This is an increase of $17. It is important to know that Medicare Part B premiums are taken straight out of Social Security checks. Some people can also ask that their Medicare Advantage or Part D premiums be taken out as well.
Part B payments are based on the beneficiary’s modified adjusted gross income (MAGI) from the previous two years. People who made less than $106,000 a year in 2023 will pay the normal monthly premium in 2025.
Married couples who made less than $212,000. People with higher incomes will have to pay more for insurance because of Income-Related Monthly Adjustment Amounts (IRMAA).
About 8% of Medicare Part B recipients are affected by these changes based on their income, according to the Centers for Medicare and Medicaid Services.
Taxes may go up if income changes.
People who are retired should always be on the lookout for changes in their income that could put them in a higher tax rate.
Prez of Vosberg Wealth Management in Glendora, California, CFP Brian Vosberg says, “What we have seen with clients is a rise in other income that has caused more of their Social Security to be taxed.”
It is important to know that Social Security income is not taxed separately. Instead, it is taxed along with adjusted gross income, interest that is not taxed, and half of your Social Security benefits.
This number will be charged if it goes over a certain limit. Beneficiaries can ask for federal taxes to be taken out of their benefit payments so they do not get any unpleasant shocks.
Planning your taxes ahead of time is the best way to escape paying too much. Vosberg suggests either buying an annuity so the interest grows tax-free or taking less money from other sources, like IRA payments, to help lessen the blow.
