Except For Hefty New Hit To Highest Earners
Ashlea Ebeling Forbes Staff Retirement I write about how to build, manage and enjoy your family’s wealth. Credit: Getty Royalty Free
The Centers for Medicare & Medicaid Services has announced Medicare Part B premiums for 2019, and the base premium increases modestly from $134 to $135.50 a month. Yet high earners are still getting used to a big bump in income-related surcharges that kicked in this year. And the very highest earners are facing another big increase for 2019. That means that the wealthiest senior couples will be paying over $11,000 a year in Medicare Part B premiums. Part B (the base and the surcharge) covers doctors’ and outpatient services.
The CMS announcement comes just after yesterday’s Social Security Administration’s COLA announcement: a 2.8% cost of living adjustment for 2019. The average Social Security benefit for a retired worker will rise by $39 a month to $1,461 in 2019. The small increase in Part B premiums mean most retirees will get the benefit of the Social Security COLA (Part B premiums are deducted from monthly Social Security checks).
While most Medicare recipients will pay the new $135.50 standard monthly premium, an estimated 2 million (3.5%) will pay less because of a “hold harmless” provision that limits certain beneficiaries’ increase in their Part B premium to be no greater than the increase in their Social Security benefits.
Then there’s the 5% of Medicare recipients who have to pay income-related surcharges. The graduated surcharges for high-income seniors kick in for singles with modified adjusted gross income of more than $85,000 and for couples with a MAGI of more than $170,000. An individual earning more than $85,000, but less than or equal to $107,000, will pay $189.60 in total a month for Part B premiums in 2019, including a $54.10 surcharge. That’s barely up from 2018: $187.50 total in a month, including a $53.50 surcharge.
By comparison, the wealthiest retirees – singles with $500,000 of income and couples with $750,000 of income — will see a 10.3% increase in their income-related surcharge from $294.60 in 2018 (when they were part of the greater-than-$160,000/$320,000 group) to $325 in 2019. Total premiums for this group will be $460.50 a month in 2019 ($11,052 a year).
Cost-of-Living Adjustment (COLA) Information for 2019
Social Security and Supplemental Security Income (SSI) benefits for more than 67 million Americans will increase 2.8 percent in 2019.
The 2.8 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 62 million Social Security beneficiaries in January 2019. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2018. (Note: some people receive both Social Security and SSI benefits.)
The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $132,900.
The earnings limit for workers who are younger than “full” retirement age (age 66 for people born in 1943 through 1954) will increase to $17,640. (We deduct $1 from benefits for each $2 earned over $17,640.)
The earnings limit for people turning 66 in 2019 will increase to $46,920. (We deduct $1 from benefits for each $3 earned over $46,920 until the month the worker turns age 66.)
There is no limit on earnings for workers who are “full” retirement age or older for the entire year.
Information about Medicare changes for 2019, when announced, will be available at www.medicare.gov. For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2019 are announced. Final 2019 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social Security’s Message Center.
Your COLA Notice
In December 2018, Social Security COLA notices will be available online to most beneficiaries in the Message Center of their my Social Security.
This is a secure, convenient way to receive COLA notices online and save the message for later. You will still receive your COLA notice by mail this year, but in the future you will be able to choose whether you receive your notice online instead of on paper. Be sure to choose your preferred way to receive courtesy notifications so you won’t miss your secure, convenient electronic COLA notice.
Online notices will not be available to representative payees, individuals with foreign mailing addresses, or those who pay higher Medicare premiums due to their income. We plan to expand the availability of COLA notices to additional online customers in the future.
Remember, our services are always free of charge. No government agency or reputable company will solicit your personal information by email or request advanced fees for services in the form of wire transfers or gift cards. Avoid falling victim to fraudulent internet “phishing” schemes by not revealing personal information, selecting malicious links, or opening malicious attachments. You can learn more about the ways we protect your investment, personal information, and my Social Security.
History of Automatic Cost-Of-Living Adjustments (COLA)
The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation. It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.
The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs.
Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975. Before that, benefits were increased only when Congress enacted special legislation.
Beginning in 1975, Social Security started automatic annual cost-of-living allowances. The change was enacted by legislation that ties COLAs to the annual increase in the Consumer Price Index (CPI-W).
The change means that inflation no longer drains value from Social Security benefits.
Special Note not sure how much Medicare B will increase.