Methods to guard your Social Safety cost-of-living adjustment in 2022

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Despite the largest adjustment in the cost of living in decades, it can still be difficult for Social Security beneficiaries to expand their monthly checks further over the next year.

The reasons: Inflation continues to drive consumer prices higher, while Medicare Part B standard premiums will rise 14.5% in 2022, more than expected.

The consumer price index, a government measure of price developments over time, rose 6.2% year-on-year in October, marking the largest rise in inflation in 30 years.

Standard Medicare Part B premiums will also be higher next year, partly due to a new, expensive Alzheimer’s drug.

This could affect how much people will be affected by the 5.9% cost of living adjustment of Social Security for the next year.

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“Inflation is ahead of the COLA amount right now,” said Mary Johnson, social security and Medicare policy analyst with the Senior Citizens League, a non-partisan senior group.

“If inflation eases, purchasing power could improve,” she said.

Those with the lowest monthly social security benefits – around $ 366 per month – won’t see any increase at all over the next year, according to calculations by the Senior Citizens League. Higher benefits – about $ 2,870 per month – will increase about 5.1%.

In order to plan for these changes over the next year – and to get the most of the cost of living adjustments – there are a few things you should be doing now.

Calculate your benefit for 2022

The social security authorities will provide you with statements of your official monthly benefits for the next year.

While you wait, calculate how much you can expect yourself. Take your monthly benefit from that year and multiply it by 1.059 to determine what the cost of living increase is for the next year. Then subtract your estimated Medicare Part B premium based on your income level.

Remember, people with income above a certain level will pay more for Medicare Part B due to what are known as earnings-related monthly adjustment amounts, or IRMAAs.

The social security administration usually starts sending notices of the new benefit amounts in early December. However, most beneficiaries can view this information through their My Social Security online accounts.

Shop during Medicare Open Enrollment

You may still have time to find a better rate for your health insurance through Medicare Open Enrollment, which runs through December 7th.

You can opt for a Medicare Advantage plan that provides Medicare benefits through a private insurer.

If you choose a Medicare Advantage plan, you may be able to find broader coverage for as much or less than the Part B premium will cost you, said Sri Reddy, senior vice president of annuity and income solutions at Principal Financial Group.

“You’d be doing yourself wrong if you didn’t look around and make sure you got the best coverage and the best price,” Reddy said.

The variety of Medicare Advantage plans available depends on where you live, according to Johnson.

You can still potentially “save significantly” by changing your Medicare Part D coverage for prescription drugs, Johnson said.

From year to year, the private insurers that offer these plans may stop coverage for certain prescriptions altogether or change their coverage levels, which could mean paying much more for the same medications.

“There are a number of pitfalls that can happen,” said Johnson.

It is important to read the fine print before registering.

“When you discover a problem or problem, you can save hundreds and even thousands of dollars by switching to a more efficient plan, either your health plan or your medication plan,” said Johnson.

Plan ahead to ease your tax burden

A 5.9% cost of living adjustment in 2022 will increase the gross amount of your benefits and income. The result: more of your social security benefits could be taxable.

That would affect you in tax year 2022 and due in tax season 2023, Johnson said, which means it’s time to plan ahead.

Consulting a tax advisor can help determine the best strategy for you. This could include keeping more money for taxes on your social security benefits or your retirement account distributions, or making other adjustments.

Local senior centers may have tax professionals on hand to help cut costs, Johnson said. In addition, your local aging agency may offer Medicare counseling services.

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