Social Security COLA Strategies That’ll Protect Your Benefits Despite High Inflation
Next year, Social Security beneficiaries may have difficulty counting up their monthly checks stretch further despite the fact that it’s the largest cost-of-living adjustment benefit in decades.
Consumer prices are rising because of inflation, and standard Medicare Part B premiums will increase by 14.5% in 2022, a higher increase than expected.
October birth a new record that saw the largest annual inflation increase in 30 years, with the Consumer Price Index up 6.2% year over year.
The new, expensive Alzheimer’s drug will also cause a rise in Medicare Part B premiums next year.
This could affect Next year’s Social Security cost-of-living adjustment by 5.9% of how much people get.
“Inflation is still running ahead of the COLA amount right now,” Mary Johnson, a Social Security and Medicare policy analyst, said.
“If inflation moderates, buying power may improve,” she explained.
Based on The Senior Citizens League’s calculations, beneficiaries receiving the lowest monthly Social Security benefits – about $366 per month – will not see any increase next year. There will be a 5.1% increase for higher monthly benefits of around $2,870.
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Calculate your 2022 benefit
Source: The Senior Citizens League
There are a few things you should do now to prepare for those changes next year – and take full advantage of the cost-of-living adjustment. You will receive your Social Security benefits for the upcoming year from the Social Security Administration.
In the meantime, you can figure out how much your contribution will be on your own. All you should do is to take your current monthly benefit and multiply it by 1.059 to figure out the amount you will get from next year’s inflation adjustment. After that, deduct or minus the estimated Medicare Part B premium according to your income level.
Due to what’s known as Income-Related Monthly Adjustment Amounts, or IRMAAs, people who earn more than certain levels will need to pay more for Medicare Part B.
Usually, social security administrations will begin mailing notices of new benefits in early December. This will however be accessible to most beneficiaries through their online account, My Social Security.
Medicare Open Enrollment is a Good Time to Shop Around
The Medicare open enrollment period, which runs through Dec. 7, may still allow you to secure a better rate for your health coverage.
Private insurers do offer Medicare benefits through Medicare Advantage plans, so, you can go for that.
Typically, you can also find broader coverage with a Medicare Advantage plan for the cost of your Part B premium or less. Principal Financial Group’s senior vice president of retirement and income solutions, Sri Reddy, said as much.
“You would be doing yourself an injustice if you didn’t shop around and make sure you have the best coverage and the best price,” Reddy stated.
Base on where you live, there are different options you can seek for on Medicare Advantage plans.
It might be possible for you to “save considerably” by switching from Medicare Part D coverage to prescription drugs, Johnson asserted.
From time to time, the private insurance companies that run those plans may stop covering certain medications, or their coverage levels may be changed. As a result, the same medications may cost much more.
“There’s any number of pitfalls that can happen,” Johnson warned.
“If you catch some issue or problem, it can save you hundreds and even thousands of dollars by making a move to a more efficient plan, either your health plan or your drug plan,” he added.
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You can Minimize your Taxes if you Plan Ahead
In 2022, you will see your gross benefits and income rise by 5.9% due to a cost-of-living adjustment. This may result in a rise in taxes on your Social Security benefits. You would be affected by this in the 2022 tax year, and you would have to pay it in the 2023 tax year. Therefore, you have time to prepare, Johnson asserted.
Nonetheless, you can determine which tax strategy is most suitable for you using the advice of a tax advisor. It may involve possessing more money withheld for taxes either from Social Security benefits or your retirement account distributions or making other adjustments.
Assistance from Tax professionals may be available at local senior centers at reduced costs, Johnson said. Medicare counseling may also be available through your local Agency on Aging.