Social Security And Fica
Most employees and employers each pay Social Security and Medicare taxes on Social Security and Medicare covered wages. These taxes comprise FICA .
Social Security Portion of FICA
- The Social Security portion of FICA is 6.2% of the maximum taxable wages.
- If you reach the maximum payment, you do not pay any more Social Security tax until the next calendar year.
- The maximum taxable wage for Social Security is adjusted each year. Visit Social Security Administration site to learn more about your Social Security Contribution and Benefit Base.
Medicare Portion of FICA
- The Medicare portion of FICA is 1.45% for wages up to 200,000 and 2.35% for wages above $200,000.
- There is no cap on wages for the Medicare portion of FICA.
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Don’t Celebrate All Of That Extra Money Just Yet
Seniors on Social Security had a hard time coping with inflation in 2022. And a big reason had to do with the fact that their cost-of-living adjustment only came in at 5.9%. Because the rate of inflation far surpassed 5.9% last year, seniors lost out on buying power at a time when just about every single living expense imaginable was on the rise.
But things are shaping up to be very different in 2023. This year, seniors on Social Security are getting an 8.7% COLA — the largest raise to arrive in decades.
Image source: Getty Images.
Meanwhile, in recent months, the pace of inflation has slowed modestly. That doesn’t mean we’re not still starting off the year with higher-than-average living costs. But it does mean that for the first time in a long time, Social Security recipients might actually gain buying power based on their COLAs, rather than lose it.
Another reason Social Security beneficiaries might come out ahead financially this year? Medicare costs are shrinking, not rising.
Medicare enrollees who are also on Social Security have their Part B premium costs deducted from their benefits automatically. But since the cost of Medicare is down in 2023, seniors should get to keep their 8.7% COLAs in full.
While a nice boost to Social Security might help recipients better manage their expenses in 2023, it could also lead to higher Medicare costs for some down the line. And that’s something seniors should keep in mind so they’re not thrown for a loop.
When Are Medicare Premiums Due
All Medicare bills are due on the 25th of the month. In most cases, your premium is due the same month that you get the bill. Example of billing timeline
For your payment to be on time, we must get your payment by the due date on your bill. Submit your payment at least 5 business days before the due date, so we can get it on time.
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Medicare Part B Premiums
Beneficiaries enrolled in Medicare Part B must pay premiums .35 By law, individuals receiving Social Security benefits have their Medicare Part B premiums automatically deducted from their benefit checks.36 In 2017, approximately 75% of Medicare Part B enrollees had their Medicare Part B premiums deducted from their monthly Social Security benefit checks.37 Those not receiving Social Security are billed by Medicare,usually on a quarterly basis.38Individuals who are enrolled in Medicare Part B but do not receive Social Security may include individuals who are waiting to reach full retirement age and individuals who spent their careers in employment that was not covered by Social Security, including certain federal, state, and local government workers.
The standard monthly Medicare Part B premium in 2018 is $134.00. This premium applies to individuals with a modified adjusted gross income of $85,000 or less and to couples with a MAGI of $170,000 or less.42 Enrollees earning more than those respective amounts pay higher premiums based on their income, as shown in Table 1.
Table 1. Medicare Part B Premiums, 2018
Modified Adjusted Gross Income a
Notes: Each member of a couple pays the applicable premium. Lower thresholds are rounded up to the nearest dollar and upper thresholds are rounded down to the nearest dollar.
I Am About To Turn 65 And Go On Medicare And My Income Is $125000 I Know That People With Higher Incomes Are Required To Pay Higher Premiums For Medicare Part B And Part D How Will These Higher Premiums Affect Me
Medicare beneficiaries with incomes above $97,000 for individuals and $194,000 for married couples are required to pay higher premiums. The amount you pay depends on your modified adjusted gross income from your most recent federal tax return. To determine your 2023 income-related premium, Social Security will use information from your tax return filed in 2022 for tax year 2021. If your income has gone down since you filed your tax return, you should contact Social Security and provide documentation regarding this change. At your current income level, in 2023, you would pay around $4,735 in annual Medicare premiums combined for Part B and Part D .
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Can I Use Social Security Benefits To Pay My Medicare Premiums
Your Social Security benefits can be used to pay some of your Medicare premiums.
In some cases, your premiums can be automatically deducted If you receive Social Security Disability Insurance or Social Security retirement benefits.
However, this doesnt apply to all Medicare premiums. Each part of Medicare has its own premiums and rules for interacting with Social Security.
Well discuss how this works for each part next.
Are My Medicare Premiums Tax Deductible
Medicare premiums are tax deductible. However, you can deduct premiums only once your out-of-pocket medical expenses reach a certain limit.
The IRS has set that limit at 7.5 percent of your adjusted gross income . Your AGI is the money you make after taxes are taken out of each paycheck.
The IRS allows you to deduct any out-of-pocket healthcare expenses, including premiums, that are more than 7.5 percent of your AGI.
So, if you have an AGI of $50,000, you could deduct healthcare expenses after youve paid $3,750 in medical expenses. Depending on your premiums and other healthcare spending, you might not reach this number.
If your spending is less than 7.5 percent of your AGI, you cant deduct any healthcare expenses, including premiums. However, if your healthcare spending is more than 7.5 percent of your income, you can deduct it.
Keep careful track of your out-of-pocket medical expenses throughout the year so you can make the proper deductions at tax time.
You can pay your Medicare bills online or by mail if they arent automatically deducted. You wont pay an added fee for parts A, B, or D, based on your payment method.
There are several ways to pay:
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Can You Change How You Pay For Medicare
If you have Social Security benefits, your Part B premiums will be automatically deducted from them. If you dont qualify for Social Security benefits, youll get a bill from Medicare that youll need to pay via:
- Your online Medicare account
- Medicare Easy Pay, a tool that lets you automatically transfer monthly payments
- Online bill pay through your bank account
- Check, money order, or credit card payment
If you are having trouble paying your bill, you can contact someone at Medicare for help.
Medicare Advantage and Part D premiums arent automatically deducted from your Social Security benefits, so youll typically receive a bill and pay the insurer directly. If youd prefer to have your premiums for these plans deducted from your benefits check, you can contact your insurer to request this change.
Medicare Part D Premiums
Each year, the Medicare Part D base premium is set at 25.5% of the expected per capita costs for standard prescription drug coverage.49 Beneficiary premiums are based on average bids submitted by participating drug plans for basic benefits each year and are adjusted to reflect the difference between the standardized bid amount of the plan the beneficiary enrolls in and the nationwide average bid. The actual cost of coverage and premiums, however, varies by plan. Medicare Part D enrollees may pay premiums to their plans directly or may have premiums automatically deducted from their Social Security benefits.50
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Is Medicare Part A Free At Age 65
You are eligible for premium-free Part A if you are age 65 or older and you or your spouse worked and paid Medicare taxes for at least 10 years. You can get Part A at age 65 without having to pay premiums if: You are receiving retirement benefits from Social Security or the Railroad Retirement Board.
Groups Not Covered By The Hold
Several groups are not covered by the hold-harmless provision. The following groups may receive reduced Social Security benefit payments due to Medicare premium increases that are greater than the Social Security COLA:
- New enrollees to either Medicare or Social Security 63
- Medicare Part B enrollees who do not receive Social Security benefits
- High-income individuals who pay income-related Medicare Part B premiums
- Low-income beneficiaries who are in a Medicare Savings Program .
Medicare Part B enrollees who do not receive Social Security may include individuals who spent their careers in employment that was not covered by Social Security, including certain federal, state, and local government workers. This includes civilian federal employees who were hired before 1984 and are receiving Civil Service Retirement System benefits. Although CSRS benefits are increased annually by the same COLA applied to Social Security benefits, the benefits are not Social Security benefits and thus its beneficiaries are not protected under the hold-harmless provision.64
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Can You Have Medicare Advantage And Medicare Part D Premiums Deducted From Social Security
Medicare Advantage plans and Medicare Part D prescription drug plans are sold by private insurance carriers. These plans are partially funded by the federal government, however, and it is still possible to have the premiums deducted from your Social Security benefits.
The ability to have Medicare Advantage and Medicare Part D premiums deducted from your Social Security benefits may not be offered by every insurance company, so check with your plan carrier directly for more information.
Social Security Vs Medicare
Social Security provides federal income benefits in retirement based on what youve earned over a lifetime of working. Your Social Security benefits are calculated using your highest 35 years of wages, and the amount you receive is based on your pay over your lifetime and how long you wait to claim your benefits. Social Security also pays benefits to people living with disabilities, survivors of workers who have died and dependents of beneficiaries, according to the Social Security Administration
Medicare provides federal health insurance for people age 65 and older and younger people living with certain disabilities or chronic conditions. Medicare is made up of four parts, including Part A , Part B and Part D . It also includes Part C, or Medicare Advantage, which is a bundled alternative to Original Medicare offered by private insurance companies, including all the coverage of Part A and B, plus some additional benefits.
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Help With Medicare Costs
Medicare costs can add up. There are premiums, copays, coinsurance and other out-of-pocket costs. All of these can add up to thousands of dollars you have to pay every year. But fortunately, there is help available those who qualify to help cover some of these costs. If you have limited income and resources, you might be eligible and you could save up to $5000/year.
- Is your monthly income less than or equal to $1,615 single/$2,175 couple?
- Are your assets less than $18,000, not including your home or car?
If you answered yes, then you may be eligible for help with your Medicare costs.
What Are The 2023 Income Adjustments For Medicare Part D
If you receive Medicare Part D for prescription drug coverage which received a massive boost this year from the passage of the Inflation Reduction Act and earn more than a certain amount, youll need to pay extra monthly. The adjustment amounts for each income tier havent changed much at all from 2022, but the income brackets themselves all rose about 6%.
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How Do I Receive The Medicare Giveback Benefit
You will not receive checks directly from your Medicare Advantage plan carrier. You can get your reduction in 2 ways:
How To Apply Online For Just Medicare
Are you within three months of turning age 65 or older and not ready to start your monthly Social Security benefits yet? You can use our online retirement application to sign up just for Medicare and wait to apply for your retirement or spouses benefits later. It takes less than 10 minutes, and there are no forms to sign and usually no documentation is required.
To find out what documents and information you need to apply, go to the .
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Can Original Medicare Premiums Be Deducted From Social Security
Original Medicare is made up of Part A and Part B . This is the federally administered portion of Medicare.
Medicare Part A premiums may not be deducted from Social Security benefits, but most people do not pay a premium for their Part A coverage.
- Beneficiaries who paid Medicare taxes for at least 40 quarters qualify for premium-free Medicare Part A.
- Only beneficiaries who have not paid Medicare taxes for at least 40 quarters must pay a premium for Part A.
Medicare Part B premiums can be deducted from Social Security benefits, however. In fact, most Part B beneficiaries. Part B premiums may also be deducted from Railroad Retirement Board benefits.
If you are enrolled in Part B and are collecting Social Security benefits, Medicare will automatically deduct your Part B premiums from your Social Security check. This prevents you from having to pay your premium manually.
If you qualify for premium-free Part A, you wont owe any monthly premium for Part A, and you can still have your Part B premium deducted from your Social Security check.
One additional benefit to having your Part B premium deducted from your Social Security check is that it activates the hold harmless provision that protects you from having your Social Security check reduced if the annual increase in the premium is higher than Social Securitys cost-of-living adjustment .
Who Is Eligible For Social Security Retirement Benefits
As mentioned, youll need to meet a few requirements to be eligible for Social Security retirement benefits. Just like with Medicare, youll need to be a United States citizen or permanent resident. You might also need to have worked and earned credits. The amount of credits you need depends on your circumstances and the type of benefit youre applying for.
Youll need at least 40 credits in order to apply for retirement benefits. Since you can earn up to four credits a year, youll earn 40 credits after 10 years of work. This rule applies to anyone born after 1929.
The amount youll receive per month will depend on your income throughout your working life. You can use the calculator on the Social Security website to estimate your retirement benefits.
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Projected Impact Of Medicare Premium Growth On Social Security Benefits
Medicare per capita cost growth is expected to continue to increase at a faster rate than inflation measured by the CPI-W, thus increasing Medicare premiums at a faster rate than Social Security COLAs. The Medicare Trustees project that Medicare beneficiaries will use a larger portion of their Social Security benefits to pay Medicare Part B and Part D premiums in the future. For example, in 2018, the Medicare Part B and Part D premiums account for 12.4% of the average Social Security benefit 68 the Medicare Trustees project that this will increase to approximately 14.0% in 2028 and to 16.8% in 2092.69 Out-of-pocket costs are also expected to continue to absorb an increasing amount of the average Social Security benefit the Medicare Trustees project that out-of-pocket costs as a percentage of the average Social Security benefit will increase from approximately 23.6% in 2018 to approximately 26.9% in 2028 and to approximately 34.5% in 2092.70
The historical and estimated increases in average Social Security benefits, the average Medicare Part B and Part D benefits, average Medicare Part B and Part D premiums, and average out-of-pocket costs as indicated by the Medicare Trustees long-range projections are shown in Figure 2.
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What Is The Texas Health Information Counseling And Advocacy Program
If you are eligible for Medicare, the Texas’ Health Information, Counseling and Advocacy Program can help you enroll, find information and provide counseling about your options. This partnership between the Texas Health and Human Services system, Texas Legal Services Center and the Area Agencies on Aging trains and oversees certified benefits counselors across the state.