As financial advisors here at JGUA, we pay close attention to new laws, regulations and government administration announcements as they may impact our client’s financial health. This includes the annual Social Security Administration update.
This year there are three updates that effect those currently receiving benefits, or plan to collect benefits this year.
- COLA: The biggest change announced was the Cost of Living Adjustment (COLA) for 2023. Those that began collecting benefits at full retirement age will see a 8.7% increase in their benefits for this year. (Although, early or delayed retirement effects the exact calculation of benefits.) While benefits may increase, the purpose of COLA is to help offset inflation and does not necessarily increase discretionary spending.
- Medicare Part B Premium Offset: It is very typical that if the cost-of-living increases, so does medical insurance premiums. As a result, in an average year Medicare recipients will see an increase in their Medicare part B premiums. Many recipients elect to pay for these premiums directly from their Social Security benefit. This often offsets any “benefit” the recipient may have from that year’s COLA. This year the Social Security Administration announced that the cost of the Medicare Part B Premium would not increase. In fact, the Medicare Part B premium decreased from $170.10/month to $164.90/month. As a result, those collecting Social Security and electing to pay for their premiums directly from their benefit will feel the full benefit of COLA in their wallet.
These two changes may have an impact on an individual’s monthly budget, especially in a situation when both spouses are receiving their Social Security benefits. When I am working with individuals in this stage of their life, I assist them with understanding their monthly cash flow to inform them on how these changes may impact them. My degree of involvement ranges from organizing my client’s monthly budget to sifting through bank statements to capture monthly spending habits.
- Work Income Threshold: A common topic when discussing Social Security is the impact receiving Social Security benefits while working has on their total withholding. Those that decide to work while collecting Social Security while under their Full Age of Retirement must be aware of the Social Security work income threshold. For every two dollars in annual work income exceeding the work income limit, one dollar of benefits will be withheld. In 2023 the work income threshold increased from $19,560 to $21,240. The work income threshold only applies to the individual collecting benefits, and therefore is not imputed on the spouse if the Social Security benefit recipient is married. If this update does apply to you, be sure to work closely with your advisor to ensure you are not running afoul with these rules.
If you have any questions about the recent Social Security Administration updates and want to learn more on how to optimize your Social Security benefits, reach out to our team here at JGUA by calling 1 (800) 936-3785 or by email at email@example.com. – Someone is always here for a chat!