Home About Archives RSS Feed

The Independent Investor: Changes to Social Security and Medicare Benefits

By Bill Schmick
iBerkshires columnist
As the year begins, those who are retired, or who plan to soon, need to know the changes the government has recently announced to your benefits.
 
The good news is that retirees will get a 2.8 percent increase in Social Security payments. While that doesn't sound like much, it happens to be the largest cost-of-living adjustment in seven years. What that amounts to for the average couple in retirement is about $67 per month, or an average monthly payment of $2,448.
 
If you are one of those workers like me, who waited until 70 years of age before collecting benefits and are considered a "high earner," then you will be receiving as much as $73 more per month up to $2,861. On the opposite end of the scale, individuals who want to claim their benefits earlier than their full retirement age, (but still plan to work) get a benefit. The amount of money they can make before their Social Security benefits are reduced or eliminated has increased. This year, a worker younger than 66 can earn up to $17,640 before losing any social security benefits. That is $600 more than last year. After that, they will lose $1 in benefits for every $2 of earnings over that limit.
 
If you are going to turn 66 this year, you can earn as much as $46,920 without jeopardizing your benefits, which is $1,560 more than you could last year. Anything over that new limit will mean you will lose $1 in benefits for every three bucks you make. The earnings cap goes away once you reach full retirement age. That means you can earn any amount without forfeiting your benefits.
 
However, the government both giveth and taketh away. As I predicted in past columns, the government has increased the retirement age yet again. For those readers born after 1954, the new current retirement age is 66 years old. Those of us born in 1957 or later have just had six months tacked on to full retirement age. You now have to wait until you reach 66 1/2. You can still opt for early retirement at 62, but your benefits will now be reduced by 27.5 percent (compared to 25 percent last year).
 
As most readers know, in order to qualify for Social Security in the first place, you must earn at least 40 "credits" with a maximum of 4 credits each year. That came to $5,280 worth of credits per year. Now, those four credits must be worth at least $5,440, or a $40 increase from 2018.
 
Social Security benefits, despite the tax cut this year, will still be taxed in the same way. That is, your tax will be based on your adjusted gross income, plus tax-exempt interest (such as municipal bonds) and half of your Social Security benefits.
 
Let's say you bring home between $25,000 and $34,000 in income this year all-in. In that case, half of your Social Security benefits will be taxed. Anything more than $34,000 and 85 percent of Social Security income will be taxed. What happens if you are married? If your combined incomes range between $32,000 and $44,000, up to 50 percent of your benefits will be taxed. Over $44,000, 85 percent will be taxed.
 
While income taxes for many may be going down this year, payroll taxes are going up — at least for high-income workers. Maximum wages subject to FICA taxes have increased by $4,500 in 2019. What that means is that high-wage earners could be paying as much as an additional $344.25 in payroll taxes this year.
 
Medicare, by the way, receives 1.45 percent of the tax on all wages.  Individuals making over $200,000 and married couples pulling in more than $250,000 a year will be required to fork over an additional high-income surcharge of 0.9 percent in Medicare taxes this year. Speaking of Medicare, the good news is that your Part B premiums (outpatient service charges and doctor visits) will only increase slightly this year.
 
Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

 

0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Miss Hall's School Announces Head's List, Honor Roll
Mount Greylock Announces Fourth Quarter Honor Roll
Investment Strategy Can Be Your GPS as You Travel Toward Goals
Tanglewood's Learning Institute Opens This Week
Gearing Up for Old and New Pop Idols
Adams Thanks Boy Scout For Cleaning Park
Cross' Big Night Lifts Team in Narrow Giorgi League Win
Pittsfield Fire Puts New Engine Into Service
Williamstown's Art Chosen to Fill School Committee Seat
Adams Town Meeting Approve All Articles on 2019 Warrant

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (295)
Independent Investor (401)
Archives:
June 2019 (6)
June 2018 (2)
May 2019 (10)
April 2019 (7)
March 2019 (7)
February 2019 (6)
January 2019 (6)
December 2018 (4)
November 2018 (9)
October 2018 (5)
September 2018 (4)
August 2018 (9)
July 2018 (2)
Tags:
Debt Ceiling Wall Street Fiscal Cliff Stock Market Taxes Metals Jobs Currency Crisis Energy Housing Debt Europe Congress Rally Greece Selloff Commodities Recession Markets Banks Retirement Economy Stimulus Oil Interest Rates Japan Election Stocks Bailout Pullback Federal Reserve Euro Europe Deficit
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: Stocks Should Move Higher From Here
The Independent Investor: Why FHA Loans Are so Popular
@theMarket: Markets Expect Fed to Cut Rates
The Independent Investor: The Suburban Dilemma
@theMarket: When Bad News Is Good News
The Independent Investor: Long-Term Planning Is Crucial to Caregiving
@theMarket: Have the Wheels Come Off the Market?
The Independent Investor: Cost of Caregiving Keeps Climbing
@theMarket: Markets Held Hostage by Trade & Machines
The Independent Investor: Don't Take Loans From Your Tax-Deferred Accounts