By Randy Brunson
SUWANEE, Ga. | “Cola” often brings to mind Atlanta’s favorite soft drink. In this case, we are referring to the Cost-of-Living Adjustment (COLA) as it applies to any number of federal details which impact each of us. Here are a few such details.
Brunson
FICA taxes, or what we often call Social Security taxes, are paid on all earned income up to a specified amount each year. That specified amount is referred to as the Social Security Wage Base, which wage base goes up each year. In 2024, the SS wage base is $168,600, meaning you and I pay social insurance taxes of 7.65 percent on the first $168,600 of earned income. That wage base was $87,900 in 2004 and $117,000 in 2014. These represent annualized increases of about 3.5 percent, a much more accurate assessment of actual inflation over the last 10 to 20 years, in this author’s opinion.
Further, Medicare taxes, a component of FICA taxes, are due and payable on all earned income, with no earned income cap. This tax is 1.45 percent for employees and the same number for employers. So if you are self-employed filing on Schedule C, then you pick up the full 2.9 percent. Likewise, if you are a partner in a partnership. This means that Medicare taxes are $2,900 for every $100,000 of income. This matters to few of you. To those who are impacted however, we believe there are more tax-effective ways to structure your cash flow.
For those of you already receiving Social Security, your inflation or COLA increase for 2024 will be 3.2 percent. And your Medicare Part B premium will be $174.70.
For those of you who file your tax return as married filing jointly, and whose modified AGI (MAGI) is greater than $194,000, your Medicare premiums increase by $65.90 to $240.60. If your MAGI is greater than $246,000, your monthly Medicare premiums increase by $164.80, to $339.50. There are additional increases at $306,000, $366,000, and $750,000. And this is per person, meaning some households can and will pay a total of $1,200 per household, for Medicare coverage.
Why do we reference this? We have seen many households spend decades being diligent with saving and investing, and then move through their late 60’s and into their 70’s and 80’s with significant income because of a lifetime of good habits. And the actual cost of Medicare premiums for Parts B and D can come as a shock.
Changing subjects entirely for brief remarks about automobiles.
Two things my dad taught me about cars. First, if your car is overheating, start by replacing the radiator cap. It is a relatively inexpensive part and it’s possible that the gasket or seal on the cap has deteriorated, making it ineffective. The lesson? When in fix-it mode, start with the simple and inexpensive solutions first.
The other thing he taught me? The reason I drive with my lights on all the time is not so I can see. It’s so other drivers can see me.
- Have a comment? Send to: elliott@brack.net
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