For quite a while now we’ve been reading the reports from the Social Security Administration’s reviews of the status of the trust fund – where the prediction is that we’ll end up in the year 2033 with only enough money to pay 77¢ on the dollar of the promised benefits from Social Security. So far this revelation has not resulted in policymakers’ taking any actual steps to fix things, but sometime someone has to act. What can be done about fixing Social Security?
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You know how, after you’ve put your kids through college and they go off on their own, sometimes you don’t hear from them as often as you’d like? Major things occur in your kids’ lives and you don’t know about them until after the fact, possibly long after. So you get onto them about it, and ask the kids to call more often (or you call them more often) so that you can keep up with what’s going on… It’s kinda like that with the Social Security. They want to know when major changes occur in your life, as soon as possible. This is primarily due to the fact that, quite often, these changes will result in adjustment to your Social Security benefits. The first one that comes to mind is the death of a Social Security recipient. Naturally you need to notify the Social Security Administration as soon as […]
When the Social Security Administration announced the Cost of Living Adjustment (COLA) for 2013, this also allowed for calculation of the bend points for 2013. Bend points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series. They’re called bend points because they represent points on a graph of your AIME graphed by inclusion in calculating the PIA. If you’re interested in how Bend Points are used, you can see the article on Primary Insurance Amount, or PIA. Here, however, we’ll go over how Bend Points are calculated each year. To understand this calculation, you need to go back to 1979, the year of the Three Mile Island disaster, the introduction of the compact disc and the Iranian hostage crisis. According to the AWI Series, in […]
jb update 10/16/2012: The wage base for 2013 was confirmed at $113,700. The Social Security Administration trustees recently projected the wage base for 2013. This is the maximum amount of wage income that an individual earns for the year that is subject to Social Security withholding tax. For 2013, this amount is projected at $113,700. The new amount is $3,600 more than the 2012 wage base, which is set at $110,100, for an increase of 3.27%. Keep in mind that this is only the increase in the taxed wage base, and there is little correlation between this and any potential increase in benefits for the year. Future years’ estimated wage bases are projected as follows: 2014: $117,900 2015: $123,000 2016: $128,400 These are only projections, each year in October the SSA trustees will set the amount for the coming year.
From “Why Social Security?” (1937) (Photo credit: Tobias Higbie) Remember way back in 2011, when the Social Security Administration used to send you a paper statement every year? This was a useful statement, which included the estimates of your future benefit at age 62, full retirement age, and age 70, as well as a run-down of your year-by-year earnings information. Ah the good ol’ days… Sometime in 2011 the SSA stopped mailing those statements, and instead made available on their website a series of calculators which would give you your Primary Insurance Amount (the amount you’d receive at Full Retirement Age) estimate, but little else. This calculator was nowhere near as useful, and lots of folks were upset about it. Well, apparently someone at SSA listened, because now there is a new option on the SSA website, at www.socialsecurity.gov/mystatement, where you can create an account and receive essentially the same […]
Image via Wikipedia We’ve discussed the file and suspend option in multiple articles, but did you know that there is one more option for file and suspend. This is one that provides you with the opportunity to earn delayed retirement credits (DRCs) on your Social Security benefits, even if you started receiving benefits early. File and suspend is generally an option that is used by a married couple – providing a method by which one of the two can receive Spousal Benefits while the other delays receiving benefits until later, earning DRCs. (For more on this, see this article on Spousal Benefits.) This additional option is available at Full Retirement Age (FRA), just like otherwise. But what’s different about this is that the suspend option is used when you’ve already been receiving benefits, most likely early at a reduced rate, and by suspending at FRA you make yourself eligible to […]
Image via Wikipedia We covered the Social Security annual benefit statement in depth in another article, but there is a portion of the statement that is a constant source of misunderstanding – the projection portion at the top of page 2. If you’ll take a look at this portion of the statement, you’ll see a projection of your Social Security retirement benefits, at Full Retirement Age (whatever that is for you), at age 70, and at age 62. Also listed are the amounts that you would receive for Disability Benefits, as well as amounts that your family would receive upon your death as survivors. What gets missed for many folks is the part at the top which reads: At your current earnings rate, if you continue working until… With that short phrase comes a great deal of confusion and misunderstanding. What this means is that, when you receive this document, […]
As we’ve discussed elsewhere, your Social Security benefit is calculated based on your highest 35 years of earnings over your career, indexed to the current year. So what impact can continuing to work past age 62 (or later) have on your Social Security benefits? Image by Arjan Richter via Flickr Any year in your earnings history that had very little or no earnings covered by Social Security works against you – since the calculations assume 35 years of earnings. If you only had, for example, 30 years of earnings on your record and five “zero” years, these years with no earnings will reduce your average earnings that are used for calculating your benefit amount. Continuing to work, even for a minimal amount, will eliminate these zero years from your record for calculation. In addition, if you’re earning a higher salary relative to your earnings record, some of the lower […]
October 19, 2011 update: the expected wage base increase has been confirmed as $110,100 for 2012. For more information, see this article. The Social Security Administration has released the proposed figures for the increase in the wage base for taxation for 2012 and projected some figures for the years up to 2015. This is the limited amount of income against which Social Security withholding tax is applied. For 2009 through 2011, the wage base has been static – at $106,800 for each year. The amount did not increase for these years since the average wage index (AWI) actually decreased from 2008 to 2009, and the modest increase in the index from 2009 to 2010 did not make up for the decrease in the prior year. For 2011, the AWI is expected to increase once again, by 3.08%. This sets the projected wage base for 2012 at $110,100, up a total of […]
If you have worked in a job where your pay was subject to Social Security tax withholding, and also have worked in a job where Social Security tax is not withheld, such as for a government agency or an employer in another country, the pension you receive from the non-Social Security taxed job may cause a reduction in your Social Security benefits. This reduction is known as the Windfall Elimination Provision (WEP) – and it’s named such since it was enacted to eliminate the “windfall” that would otherwise be received by a worker who fit into this description. Without the WEP, the worker would effectively be double-dipping by receiving full benefits from both plans. This provision primarily affects Social Security benefits when you have earned a pension in any job where you did not pay Social Security tax and you also worked in other jobs long enough to qualify for […]