By Matthew Gaude & Shawn McGuire
The years before retirement can be an overwhelming time. You may be excited to start a new chapter of your life, stressed about how to make it happen, and confused about the Social Security and Medicare process. It can be hard to keep track of everything, especially when new updates are rolled out every year and costs are always on the rise.
With record numbers of retirees expected in the next 10 years, (1) it’s more important than ever that you fully understand how your benefits work, and how they are affected by annual updates and changes. It can be daunting to sort through all the particulars on your own, though, so here are the top 3 Social Security and Medicare updates you need to know for 2022.
Social Security Cost-of-Living Increase
In 2022 the COLA is 5.9%, which is the biggest increase in 40 years. (2) Individuals can expect benefits to rise by an average of $92 per month, while married couples will see a $154 benefit increase. (3) The Social Security tax cap was also increased by $4,200 to $147,000, (4) meaning Social Security taxes will not be withheld from income earned above that amount.
Though there was a significant rise in the COLA for 2022, it doesn’t necessarily mean that all Social Security recipients will see a larger benefit check. This is because of the increases to the Medicare Part B premium to account for the rising costs of healthcare. It’s important to assess your unique financial situation in order to get a clear picture of your actual Social Security benefit.
Medicare Part B Premium Increase
As mentioned, the Medicare Part B premium was increased to $170.10 for 2022. This is a 14.5%, or $21.60, increase from 2021. (5) According to the Center for Medicare and Medicaid Services, the annual deductible will also be increased to $233, up from $203 in 2021. (6)
The premium was increased for a number of reasons:
- Rising healthcare costs and higher healthcare utilization among Medicare recipients
- Congress took steps to reduce the Part B premium increase in 2021 to just $3 per person per month. (7) That provision has been extended through 2025, which is why the increase was not as large as it could have been given the current level of inflation.
- Uncertainty around the Alzheimer’s drug, Aduhelm™; while not yet covered by Medicare, the $56,000-per-person price tag (8) has many concerned that Aduhelm™ could drastically impact the finances of the program. As such, the Part B premium was increased to cover contingency reserves.
The Part B premium is not the only aspect of Medicare to experience price increases. The Part A deductible, which covers the cost of inpatient hospital care, has been increased to $1,556 in 2022, $72 higher than 2021. This amount covers the first 60 days of inpatient care during a benefit period. Beyond that, Medicare recipients will pay $389 per day for days 61 to 90 and $778 for each day beyond 90. These amounts are up from $371 and $742, respectively. (9)
Increases to the Income-Related Monthly Adjustment Amount
In addition to the Part B premium increase, Medicare recipients should also keep in mind the income-related monthly adjusted amount (IRMAA), which is an additional surcharge for taxpayers earning above a certain threshold.
In 2022, single taxpayers who make less than $91,000 in modified adjusted gross income (MAGI), and married couples filing jointly who make less than $182,000, will continue to pay the standard premiums for Medicare Part B and Part D.
Those who make more than those thresholds will pay an additional Part B surcharge ranging from an extra $68 per month for single filers with MAGI between $91,000 and $114,000 to $408.20 per month for those making more than $500,000 per month. As for the Part D surcharge, Medicare recipients will pay between $12.40 to $77.90 additional per month depending on how much they earn. To find your exact surcharge amount, click here.
How Will These Changes Affect Your Plan?
If you’re concerned about how these price increases will affect your overall retirement plan, we are here for you. Live Oak Wealth Management can help you build these costs into your long-term wealth plan, ensuring you’re properly covered when the time comes. To learn more about your options, call our office at 770-552-5968 or email [email protected]. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
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