Social Security

$250 Social Security Bonus Payment

October 15th, 2009  |  Published in Social Security  |  9 Comments

When it was revealed that there would be no cost of living adjustment for Social Security in 2010, people were livid. Just reading the comments on my blog revealed that people were furious there was no adjustment next year, so you can imagine how the broader public felt about it.

It turns out the outrage has yielded results because yesterday, President Obama called on Congress to approve $250 payments to the more than 50 million senior citizens on Social Security. This would make up for the lack of a COLA for next year. Incidentally, since automatic adjustments were implemented for Social Security in 1975, 2010 would’ve been the first year there was no adjustment.

The total cost of the move is estimated at $13 billion.

In addition to the Social Security bonus payment, there was also moves to prevent a reduction in contribution limits for retirement funds like IRAs and 401(k)s.

Obama calls for $250 payments to seniors [Associated Press]

No COLA Adjustment for Social Security in 2010

April 28th, 2009  |  Published in Social Security  |  52 Comments

There’s a great US News & World Report article on the 5 Big Financial Changes for Retirees in 2010 and the first one listed is a doozy. It’s widely believed that there will be little to no near term inflation which means that Social Security cost of living adjustments will likely be zero in 2010 and beyond.

No cost-of-living boosts for Social Security. Forecasters widely predict that a slowly recovering economy will produce little or no inflation in the near term. That’s generally good news, but not for Social Security recipients, whose annual increases are tied to consumer price changes in urban areas. Health care, a major retiree expense, is not expected to see the same price moderation as will other sectors of the economy. So it’s quite possible that Social Security beneficiaries will be seeing flat payments, but still face higher prices.

Social Security Strategy: Wife Claims Early, Husband Claims Late

December 6th, 2008  |  Published in Social Security  |  2 Comments

One way a couple can maximize their Social Security benefit is to use a strategy that takes advantage of how the benefit is calculated differently for men and women. To maximize your benefit, it pays for anyone to simply wait until their almost 70 before taking payments. If you’re not actually retired, this is pretty easy to do. If you are retired and depend on Social Security for income, that’s a difficult thing to expect – wait until 70? So, the strategy is for couples to have the wife take benefits at 62 and for the husband to wait until 70.

Here’s a example of a potential scenario. The wife files for benefits at a reduced rate when she turns 63. The husband, a little older, files for just the spousal benefit, which is based on his wife’s earnings. When the husband turns 70, he can begin claiming benefits based on salary with a “delayed retirement credit,” which is what he gets for waiting until 70. This, of course, ends the spousal benefit he gets because of his wife but that’s OK.

Slick huh?

Will the Social Security Program Go Bankrupt?

December 4th, 2008  |  Published in Social Security  |  2 Comments

Until the economic crisis this year, the biggest thing on retirees’ minds was whether Social Security was going to go bankrupt. Actually, scratch that. Retirees didn’t have to worry about it, future retirees did because there were concerns that the number of people drawing from the program would outstrip the number of people contributing to it. It was a classic case of a Ponzi scheme come undone. This was, in part, because the Social Security Administrator, in its annual report, reported that starting 2017, the program will be paying out more in benefits than it collected in revenue. By 2027, Social Security would have to tap the “trust fund,” its savings, to meet the program’s obligations. Then, by 2041, the trust fund would be exhausted and the program would only be able to pay out 75% of its benefits.

2017, 2027, 2041.

Of course, none of those numbers said Social Security would coll,apse. Even by 2041, 75% of benefits would be paid out. Also, there is a lot that can happen between now and 2041, let alone 2017. The program could expand to collect more money (raise the Social Security income cap) or it could push out retirement (as it has already done in the past), all those changes can have an impact on the financial status of Social Security.

I wouldn’t be worried about it going away, but there will certainly be changes coming.

2009 Social Security Taxable Maximum Increases

October 20th, 2008  |  Published in Social Security  |  1 Comment

When the Social Security Administration announced the cost of living adjustment last week for Social Security benefits, some people clapped as benefits increased. Anyone who was working probably didn’t like to hear that it would increase 5.8% because that meant the Social Security tax would increase also because the taxable maximum would increase from $102,000 to $106,800, affecting 11 million of the 164 million workers.

The Social Security “tax (which is OASI and disability) is only 6.2% so those 11 million are only taxed an additional $297.60 if they earned more than $106,800. Not a big deal. 🙂

Inflation to Increase Social Security Benefits

October 15th, 2008  |  Published in Social Security  |  1 Comment

Social Security benefits are pegged to inflation. When the government announces inflation figures tomorrow, it’s likely that a retiree’s monthly social security benefits could increase by 5% or more. Social Security calculates the Cost of Living Adjustment (COLA) using inflation over the 12 months preceding September. It’s estimated that the CPI-W, the figure used, will be above 5% since, for the 12 months trailing August, the figure was 5.9%.

Of course this is a double edged sword. On one hand, Social security retirees will get more money. On the other, things are more expensive.

How Are Social Security Benefits Taxed?

August 6th, 2008  |  Published in Social Security  |  4 Comments

Recently a reader asked:

I would like to know the breaking points for annual income that affects the percentage of social security that is taxable. example…low income only 15% is taxable.

Social Security is normally not taxable unless you earn over a certain amount. This lower amount is called the base amount and depends on your filing status. Single and Head of Household filers have a base of $25,000. Married Filing Jointly has a base of $32,000. If your provisional income (all worldwide income, including tax-exempt income, plus half of Social Security benefits) is lower than the base, you are not taxed on your benefits.

The next tier is at $34,000 for Single and HoH and $44,000 for MFJ. If you earn between the base and the next tier’s limit, then your 50% of your benefits are taxed.

If you earn more than the second tier, then 85% of your Social Security benefits are taxed.

McCain Collects Social Security

July 21st, 2008  |  Published in Social Security  |  2 Comments

Presidential hopeful John McCain agrees with many expert’s opinions that the Social Security program is in trouble. In fact, he called it “a disgrace,” but that doesn’t stop him from cashing the checks the SSA sends him. In 2007, he received $1,930 a month in benefits and has received benefits for the last six years.

The fact that McCain’s wife earned $6 million and has a net worth of about $100 million is a sign that something is very wrong. The SSA is supposed to limit benefits if you earn above a certain amount but I suppose the McCains have some accounting guru working that all out for them.

Banks Cannot Garnish Social Security Payments

July 21st, 2008  |  Published in Social Security  |  Comments Off on Banks Cannot Garnish Social Security Payments

The Social Security Administration recently released a report on an investigation into the practice of banks garnishing Social Security and disability payments for third party creditors, a practice that is illegal. It was discovered that approximately $171.4 million was garnished from accounts receiving direct deposits of SS benefits and other direct deposits and an additional $6.3 million was garnished from accounts that contained only Social Security payments. In addition to the garnishments, they found that in some cases the banks would freeze accounts and charge penalty fees after the freezes. Those fees totaled just over $1 million between September 2006 and September 2007!

Unfortunately, consumers can do little except wait for relief from lawmakers. Some states already have laws in place that protect SS recipient accounts. In New York, the governor is expected to sign a bill that would protect the first $2,500 of a depositor’s money from being frozen if they are getting SS direct deposits, a law that is similar to those in place in California and Connecticut.

Banks Continue to Prey on Social Security Recipients [Yahoo! Finance]