Orlando Harmon
Social Security benefits are recalculated annually, with the amount of your checks potentially changing each year. This can be influenced by factors within your control, such as your work and income, and factors outside of your control, such as inflation. The yearly period for people to enroll in a Marketplace health insurance plan is from November 1 to January 15.
| Characteristics | Values |
|---|---|
| Time period | November 1 – January 15 |
| Action | People can enroll in a Marketplace health insurance plan |
| Auto-enrolment | People with Marketplace coverage will be auto-enrolled in a plan for the next year to avoid a gap in coverage |
| Opt-out | Log in to your Marketplace account no later than December 15 and select "Stop coverage for 2023" |
| Plan change | If auto-enrolled, you can still change plans until January 15 |
| Open Enrollment | November 1 – January 15 |
| Special Enrollment Period | A time outside the yearly Open Enrollment Period when you can sign up for health insurance if you've had certain life events, e.g. losing health coverage, moving, getting married, having a baby, or if your income is below a certain amount |
What You'll Learn
Medicare and Social Security
Medicare
Medicare is a federal health insurance program administered by the Centers for Medicare and Medicaid Services (CMS). It provides coverage for inpatient hospital care, nursing care, doctor's fees, drugs, and other medical services and supplies to individuals aged 65 and older, as well as to younger people with certain disabilities or permanent kidney failure.
There are two parts to Medicare: Part A and Part B. Part A is hospital insurance, which most people do not have to pay for. Part B is medical insurance, which most people pay a monthly premium for. Individuals eligible for Social Security Disability Insurance (SSDI) benefits are also eligible for Medicare after a 24-month qualifying period. During this waiting period, beneficiaries may be eligible for health insurance through a former employer.
Social Security
Social Security is a federal program that provides retirement, disability, family, and survivors' benefits to qualifying individuals. The Social Security Administration (SSA) calculates and processes benefit payments based on factors such as work history, income, and cost-of-living adjustments.
Social Security benefits, including retirement benefits, are typically computed using "average indexed monthly earnings." This average reflects up to 35 years of a worker's indexed earnings, adjusted for changes in general wage levels over time. The SSA recalculates retirement benefits annually, taking into account any changes in work, income, or inflation.
Relationship Between Medicare and Social Security
Individuals who receive Social Security Disability Income (SSDI) are typically eligible for Medicare coverage as well. Additionally, when signing up for Medicare, individuals can make both retirement and Medicare choices and withhold any premiums from their Social Security benefit payments.
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Cost-of-living adjustments
Social Security benefits are recalculated annually, and the amount of your checks can change from year to year. This can be due to factors within your control, such as your work, and factors outside of your control, such as inflation.
Social Security benefits increase over time to account for increases in the cost of living. These increases are tied to inflation, as measured by the Consumer Price Index (CPI), specifically the CPI for urban wage earners and clerical workers (CPI-W). These increases are called cost-of-living adjustments, or COLAs.
The Social Security Administration recalculates your benefits annually, and the amount of your checks can change from year to year. The Social Security Administration calculates the annual COLA in October, and the increase is reflected in payments starting the following January. The COLA for 2024 is 3.2%, boosting the average retirement benefit by $59 a month.
The first COLA, for June 1975, was based on the increase in the CPI-W from the second quarter of 1974 to the first quarter of 1975. The 1976-83 COLAs were based on increases in the CPI-W from the first quarter of the prior year to the corresponding quarter of the current year. After 1983, COLAs have been based on increases in the CPI-W from the third quarter of the prior year to the corresponding quarter of the current year.
Payment increases from continuing to work
Your Social Security payments depend in part on what you’ve earned throughout your work history. That can include work you do after you start receiving Social Security benefits.
The Social Security payment formula uses your average income from the 35 years when you earned the most, adjusted for inflation. The Social Security Administration reviews income information each year and recalculates benefits as needed. So if you continue to work after you start receiving benefits and you earn more than at least one of those 35 years, your benefits will increase.
If you worked fewer than 35 years, the formula fills in the “missing” years with zeroes. For example, if you worked for 30 years, the formula would use your income from those 30 years plus five years worth of $0 income. If you work additional years after you start receiving Social Security benefits, what you earn will replace the $0 years, and that can increase your benefits.
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Payment increases from working
The amount of your Social Security payments can change from year to year due to factors within your control, such as your work, and factors outside of your control, such as inflation.
Social Security payments are calculated based on your average income from the 35 years when you earned the most, adjusted for inflation. If you continue to work after you start receiving benefits and you earn more than at least one of those 35 years, your benefits will increase. The Social Security Administration (SSA) reviews income information each year and recalculates benefits as needed. This is an automatic process, and benefits are paid in December of the following year.
If you worked fewer than 35 years, the formula fills in the "missing" years with zeroes. For example, if you worked for 30 years, the formula would use your income from those 30 years plus five years' worth of $0 income. If you work additional years after you start receiving Social Security benefits, what you earn will replace the $0 years, and that can increase your benefits.
If you start receiving Social Security benefits before your full retirement age, there are income limits. If you exceed the limits, your payments are reduced. The full retirement age is 67 for people born in 1960 or later. For people born before 1960, it is lower.
Limits before the year you’ll reach full retirement age
For any full year when you receive retirement benefits before your full retirement age, there is an annual income limit. The limit is $22,320 in 2024.
If you’re receiving Social Security payments and continuing to work, then for every $2 you earn above the full-year income limit, your benefit payments are reduced by $1. So during 2023, if you earned $26,240, or $5,000 over the limit, your benefits would be reduced by $2,500.
The full-year income limit doesn’t apply to the year when you reach full retirement age. For example, if you turn 67 in 2024, the full-year income limit would apply in 2023 but not in 2024.
Limits during the year you’ll reach full retirement age
During the year you’ll reach full retirement age, the income limit is substantially less strict. In 2024, the income limit in the year a person reaches full retirement age is $59,520. In addition, the limit applies only to the months before your birthday month. For example, if you turn 67 in August 2024, the limit would apply to what you earn from that January through July.
For every $3 you earn above the limit, your benefit payments are reduced by $1. So if you earned $62,520 in the months before your birthday month — $6,000 over the limit — your benefits would be reduced by $2,000 for the year.
Starting the month you reach your full retirement age, your earnings are no longer subject to income limits.
Credits for reduced benefits before full retirement age
If you start receiving Social Security benefits before your full retirement age, your payments are reduced by a certain percentage for each month between the start of your benefits and your full retirement age.
But if you had benefit payments withheld because of income limits, you get credit back for each month your benefits were withheld. It’s as if you’d started receiving benefits one month later from when you reach your full retirement age.
For example, if you start receiving benefits early and then exceed the income limits for 12 months, you would get credit for those 12 months when you reach full retirement age.
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Payment decreases from working
If you start receiving Social Security benefits before reaching your full retirement age, there are income limits in place. If you exceed these limits, your payments will be reduced.
The full retirement age is 67 for people born in 1960 or later. For people born before 1960, it is lower. The Social Security Administration has a retirement age calculator that can show you the specifics based on your year of birth.
For any full year when you receive retirement benefits before your full retirement age, there is an annual income limit. The limit is $22,320 in 2024. If you're receiving Social Security payments and continuing to work, your benefit payments will be reduced by $1 for every $2 you earn above the full-year income limit.
In the year that you reach full retirement age, the income limit is less strict. In 2024, the income limit is $59,520. This limit only applies to the months before your birthday month. For example, if you turn 67 in August 2024, the limit would apply to what you earn from January through July. For every $3 you earn above the limit, your benefit payments are reduced by $1.
Starting the month you reach your full retirement age, your earnings are no longer subject to income limits. Your benefit amount will be recalculated to give you credit for the months it was reduced due to your excess earnings.
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Reporting changes in earnings
The SSA recalculates your benefits annually, taking into account factors like your work and inflation. Therefore, reporting earnings changes is vital, as it can lead to an increase or decrease in your benefit payments. For example, if you continue working after receiving benefits and earn more than in at least one of the 35 years used in the calculation, your benefits will increase. Conversely, if you start receiving benefits before reaching full retirement age and exceed the income limits, your payments will be reduced.
To report earnings changes, you can utilize various methods, including calling the SSA at 1-800-772-1213, visiting or contacting your local Social Security office, or reporting wages online through your Social Security account if your gross monthly income exceeds $1,050. Additionally, the SSA offers a toll-free automated wage reporting telephone system and a mobile wage reporting application for your convenience. Remember to report any changes as soon as possible and no later than 10 days after the end of the month in which the change occurred to avoid penalties and ensure you receive the correct benefit amount.
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Frequently asked questions
The yearly open enrollment period for Marketplace health insurance plans is from November 1 to January 15.
If you don't want the plan you're automatically enrolled in, you must enroll in a different plan by December 15.
Yes, but only if you qualify for a Special Enrollment Period. You can qualify for a Special Enrollment Period if you've had certain life events, including losing health coverage, moving, getting married, having a baby, or adopting a child, or if your household income is below a certain amount.
A Special Enrollment Period is a time outside the yearly Open Enrollment Period when you can sign up for health insurance.
The Social Security Administration recalculates your retirement benefits annually, so the amount of your checks can change from year to year.
