Financial Insights

Social Security COLA & Medicare Update

At this time of year, Medicare beneficiaries are receiving their Medicare Part B & D determination letters for 2024, which determines what their Medicare Part B premiums will be starting in January.

The 2024 standard premium for Medicare Part B will be $174.70, which is an increase of $9.80 per month when compared to $164.90 for 2023.  The Medicare Part B annual deductible will increase, by $14, to $240 for 2024.

Medicare determination letters also indicate any Medicare surcharges (Income-Related Medicare Adjustment Amount “IRMAA”) that apply to your monthly premiums.  In simpler terms, IRMAA is just a tax on income through Medicare if you make more money.  IRMAA surcharges for taxpayers change every year depending on their modified-adjusted gross income (MAGI) from the tax year two years before (i.e., 2024 amounts are based MAGI from 2022).

Depending on MAGI from two years prior, you may incur surcharges that increase the monthly cost of your Part B and Part D monthly premiums, which impacts the net amount of your monthly Social Security retirement benefit.

For example, the base Medicare Part B monthly premium for 2024 is $174.70 but it could be as much as $594.00 depending on what your MAGI was in 2022.

The discussion of IRMAA is often lumped in with Social Security because Medicare Part B monthly premiums and any surcharges are deducted from monthly social security payments.

Medicare Part B (doctors, labs and outpatient services) monthly premiums and any monthly surcharges are deducted from Social Security payments whether you have original Medicare or a Medicare Advantage plan.

You pay your monthly Part D (prescription drug coverage) premium directly to the provider, but any Part D IRMAA surcharges are deducted from your monthly Social Security payment.

Also announced last Thursday was the 2024 Social Security cost-of-living adjustment (COLA), which is based on a Labor Department measure of what Americans paid for everyday items from July through September this year compared with a year ago.  The cost-of-living adjustment helps Social Security benefits keep pace with inflation over time and Social Security is the only source of income that adjusts for inflation for most retirees (except for ACM’s income-generating investment strategies, of course!).

Starting in January, the average monthly Social Security check for retired workers will rise 3.2%, or $59, to $1,906.  That is a significantly smaller increase than the 8.7% raise retirees received this year due to high inflation.

The 2024 adjustment may feel disappointing, given that the 8.7% increase for 2023 was so high and followed a 5.9% increase the prior year.  But keep in mind that for the 12 or so years prior to that, the average COLA was about 1.5% each year, so even 3.2% is higher than the long-term average.  Next year’s COLA is currently projected to by 2.6% as inflation is projected to continue to cool down.

The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.

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