By Peter Wechsler
President & Co-Founder, Franklin Retirement Solutions
[email protected]
It’s not yet official, but it looks like Social Security checks will be going up by 3.6% in January. That’s good news and bad news. Good because inflation has whacked many seniors on a fixed income. Bad as this will help further erode the long-term stability of the Social Security system.
Social Security benefits run the gamut from less than a thousand dollars a month to over $5,000 a month for a person that paid max into the system for many years and didn’t start benefits until age 70. A person with a $3,000 a month check would see an increase of around $108 a month.
Don’t get too excited as we still don’t know how much the Medicare portion that comes out of your Social Security check will be starting in January. At present, the lowest amount is $203 a month but for higher income folks it could be much more. That’s where our friend IRMAA comes in. IRMAA stands for Income-Related Monthly Adjustment Amount, otherwise known as the sneaky tax.
If you are in the higher income brackets, instead of $203 a month, it could cost you up to $781 a month. If married and both are on Social Security, you both pay IRMAA based on joint income, so a couple could end up having over $1,550 per month taken out of their Social Security checks…and this is before taxes. Again, this is known as the sneaky tax that we didn’t prepare for.
Bottom line is that some portion of your 3.6% Social Security increase will just be an illusion because like magic, a portion will be gone to pay the higher IRMAA rates. Fun!
One more IRMAA puzzle piece; your 2027 IRMAA adjustment will be based on your 2025 income. That’s because when the government is figuring out how much to confiscate from your Social Security check, they won’t have your income numbers yet for this year, 2026. So they will use your 2025 income to calculate your IRMAA payments. More fun!!!
As we enter the last quarter of the year, you might want to check your year-to-date income to see if there are adjustments you can make if you’re close to going into a higher income bracket. We’re here to help you do the calculations and help determine if there are tax moves you should make before the ball comes down.
Enjoy the weekend with no Eagles until Monday night…
Peter