Despite the biggest cost-of-living adjustment in decades, Social Security recipients may still struggle to extend their monthly checks next year.
The reasons: Inflation continues to drive up consumer prices, while standard Medicare Part B premiums will rise 14.5% in 2022 in a larger-than-expected jump.
The Consumer Price Index, a government measure of price change over time, climbed 6.2% year over year in October, marking the largest increase in inflation in 30 years.
Standard Medicare Part B premiums will also be higher next year, in part because of an expensive new drug for Alzheimer’s disease.
This could affect the number of people in Social Security’s 5.9% cost of living adjustment for next year.
“Inflation is still ahead of the COLA amount right now,” said Mary Johnson, social security and health insurance policy analyst at the Senior Citizens League, a non-partisan seniors group. .
“If inflation slows, purchasing power could improve,” she said.
Those with the lowest monthly Social Security benefits – around $ 366 a month – won’t see any increases at all next year, according to Senior Citizens League calculations. Higher benefits – about $ 2,870 per month – will see an increase of about 5.1%.
To plan for these changes next year – and make the most of the cost of living adjustment – there are some things you should be doing now.
Calculate your benefit for 2022
The Social Security Administration will provide statements with your official monthly benefits for the next year.
Until then, you can calculate for yourself how much you can expect to receive. Take your monthly benefit for this year and multiply it by 1.059 to determine the increase you will see from next year’s cost of living adjustment. Then subtract your estimated Medicare Part B premium depending on your income level.
Keep in mind that people with incomes above certain levels will pay more for Medicare Part B due to something called monthly income-related adjustment amounts, or IRMAA.
The Social Security Administration usually begins mailing notices of new benefit amounts in early December. However, most beneficiaries will be able to see this information through their My social security accounts.
Take the tour during open Medicare enrollment
You may still have time to find a better price for your health coverage thanks to Registration open for Medicare, which lasts until December 7.
You can opt for a Medicare Advantage plan, which provides Medicare benefits through a private insurer.
By selecting a Medicare Advantage plan, you may be able to find broader coverage for as much or less than what the Part B premium will cost you, said Sri Reddy, senior vice president of retirement and income solutions at Principal Financial Group.
“You would be doing yourself an injustice if you didn’t shop and make sure you got the best coverage and the best price,” Reddy said.
The variety of Medicare Advantage plans available will vary depending on where you live, according to Johnson.
You may still be able to “save significantly” just by changing your Medicare Part D coverage for prescription drugs, Johnson said.
Year after year, the private insurers that run these plans may drop coverage for some prescriptions altogether or change their levels of coverage, which could mean you’ll pay a lot more for the same drugs.
“There are a number of pitfalls that can happen,” Johnson said.
The key is to read the fine print before signing up.
“If you have a problem or problem, it can save you hundreds or even thousands of dollars by switching to a more efficient plan, whether it’s your Medicare or your drug plan.” Johnson said.
A cost of living adjustment of 5.9% in 2022 will increase your gross benefit and income. The result: more of your Social Security benefits could be taxable.
It would affect you in fiscal year 2022 and expire in fiscal season 2023, Johnson said, which means it’s time to plan ahead.
By consulting with a tax advisor, you can work to identify the best strategy for you. This could include more money withheld for taxes from your Social Security benefits or your retirement account distributions or making other adjustments.
Local senior citizen centers may have tax professionals available to help keep costs down, Johnson said. Additionally, your local aging agency may have Medicare counseling services available.