Changes to key figures for Social Security, Medicare in 2023

Changes to key figures for Social Security, Medicare in 2023

The Social Security Administration and the Centers for Medicare and Medicaid Services recently announced key figures for the upcoming year. One positive consequence of rising inflation is that Social Security beneficiaries will realize an 8.7% increase in their benefit for 2023. Conversely, a higher CPI figure also means that current workers may pay more into Social Security next year as the wage base increases in line with inflation.

Also, due to re-pricing of an Alzheimer’s drug, retirees will actually see a slight decrease in Medicare Part B premiums next year. However, this follows a significant increase in premiums from 2021 to 2022.

As retirees (and workers) gauge their finances for the upcoming year, here are some key figures to consider.

The impact of inflation on Social Security
Social Security key figures for 2023

*This earnings test only applies in years before attaining full retirement age. A higher earnings amount ($56,520 for 2023) applies during the year of attaining full retirement age. If retirement benefits are withheld because of earnings, benefits will be increased starting at full retirement age to take into account the benefits that were withheld.

Medicare Part B premiums (based on income limit)

Medicare figures for 2023

Source: Centers for Medicare & Medicaid Services. Income based on modified adjusted gross income (MAGI), which includes tax-exempt interest income. MAGI is based on income reported on the tax return from two years prior.

Planning considerations

If possible, taxpayers may want to manage income heading into retirement to avoid facing higher Medicare Part B premiums (note that Medicare Part D premiums also increase at higher income levels). Be mindful that premiums are based on income tax returns from two years prior. For example, your tax return at age 63 will determine premiums when enrolling in Medicare at age 65.

It may be wise to avoid a large surge in income (from a Roth IRA conversion, for example). This influx in income may result in higher Medicare premiums. On a positive note, qualified distributions from Roth accounts are not factored into the calculation to determine Medicare premiums. For that reason, partial Roth IRA conversions while still working may be a way to achieve tax diversification heading into retirement.

Regarding Social Security, those who are still working should not opt to claim benefits prior to their full retirement age since it’s likely that benefits will be withheld due to the earnings test. The earnings tests does not apply once an individual reaches their full retirement age (age 67 for those born in 1960 or later). If longevity risk is a concern, consider delaying Social Security past full retirement age. Retirement benefit amounts will increase by 8% for each year delayed up to age 70.

For more insight on planning for Social Security benefits see our investor education resource “Five things you need to know about optimizing Social Security.”

For insight on Medicare benefits please refer to our investor education resource “Three key things to understand about Medicare.”


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