It’s Social Security COLA time! Let’s get ready to RUMBLE!
Last year, we saw a slightly above average increase of 2.8% and despite Medicare costs going up, many saw their benefits go up slightly (hey, even 25 bucks extra a month is at least something).
Social Security COLA (cost-of-living adjustment) announcements are tough to calculate the exact impact. Social Security is one of the most complicated systems you can come across. For some, any COLA received seems to go straight to Medicare Part B costs, others they see a little bit of an increase. Planning for it is really, truly, a one-off every time.
This year, Social Security is set to increase by 1.6%. The first payments with the updated COLA amount will be coming in January of 2020.
To put this into perspective, here’s the past 20 years or so of Social Security COLA adjustments:
For those still working, the limit on taxing income for social security has increased from $132,900 to $137,700. At a rate of 6.2% (for employees), this would be a $298 increase in Social Security tax for someone maxing out their social security “contribution” (aka tax). That’s two years in a row we’ve seen large increases to the Social Security income ceiling.
This should be expected at a minimum moving forward. This was the first year we’ve seen Social Security pay out more benefits than revenue taken in. Something to continue to monitor.
Medicare does not have an income ceiling. All earned income (wages, or self-employment income) is charged 1.45% on the first $250,000 and then jumps and additional 3.8% for income after that (for Married Filing Jointly filers).
Social Security will continue to be in the news over the coming couple of years. And we will keep providing updates along the way.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Any economic forecasts set forth may not develop as predicted.