This year Social Security beneficiaries will be getting the biggest cost-of-living adjustment in 40 years in 2023.
COLA Adjustments For Social Security Benefits
The Adjustments boosted a record high inflation when an 8.7% cost-of-living adjustment kicked in this year, and payment is set to be delivered to recipients this week.
However, there are some good news and bad news:
The 2023 monthly premium for Medicare’s outpatient care coverage will be about 3% lower than it is this year.
Social Security benefits are taxed based on a unique formula established by Congress in the 1980s and ’90s.
The Taxes May Increase In 2023 But Here Are Some Ways To Minimize Your Taxes
According to Joe Elsasser, a CFP and founder and president of Coliseum, a provider of Social Security claiming software, Social Security income might experience retirement withdrawals without facing tax consequences,
However, there may be room for some beneficiaries to increase their retirement withdrawals. In 2023, the married couple’s Social Security benefit would boost its COLA worth $38,045 and the withdrawal amount may go up to $24,793, Elsasser said.
If couples has $60,000 in Social Security benefits then they could withdraw $18,703 with no tax, which in 2023 would rise to $65,220 in benefits and slightly less than $18,585 in withdrawals but t still the results will be based on every financial situation.
On the Bright Side, to minimize your tax bite, try taking withdrawals from nontaxable income sources, such as Roth individual retirement accounts. As the Federal Reserve rate increases and, it would be wise to also pay attention to how much interest you may be making on savings, including money market accounts and certificates of deposit, that can increase your income.
Keep in mind that having a higher income due to the Social Security COLA may also affect how much you pay for healthcare coverage. People who have not yet turned 65 and are covered through Affordable Care Act insurance may see their subsidy or premium credits go down. Those who are on Medicare could have higher surcharges for Medicare Parts B and D.