Category Archives: Social Security

Delaying gratification

Claiming Social Security as soon as you’re eligible might be the fastest track to a regular check in your early 60s, but the payouts are reduced if you begin earlier than your full retirement age. What’s more, benefits further increase for each year you delay claiming until you reach 70, so delaying claiming can lead to a bigger check down the road. We want to know how this is affecting your plans.

Social Security’s 2012 makeover

There are some changes coming for Social Security in 2012 so this week’s poll is a two-parter.

The biggest change is the cost of living increase for Social Security recipients. The 3.6% increase to Social Security is supposed to be a cost of living adjustment to keep seniors up to speed with inflation, but some economists are predicting an increase in consumer spending as a result of this increase.

How is an increase in Social Security benefits possible with the economy in the shape it’s in? Payroll taxes. Everybody’s going to see a payroll tax increase in 2012.

Social Security announces 3.6 percent benefit increase for 2012

The Social Security Administration issued the following:

For 2012, Social Security benefits will increase 3.6%.  Beginning on January 1, 2012, the Social Security taxable wage base will increase to $110,100. The Social Security Old-Age, Survivors, and Disability Insurance tax rate will remain at the current 6.2% on wages up to the wage base, assessed on employees and employers, in addition to the 1.45% tax rate assessed on all wages for Medicare Hospital Insurance.

The Social Security normal retirement age for individuals born in 1947 (age 65 in 2012) is 66. Individuals born in earlier years may have a lower normal retirement age, and those born later may have a higher normal retirement age, with a maximum age of 67 for those born in 1960 and later. Other 2012 figures that have increased include:

  • The maximum amount an individual may earn in calendar years prior to attaining normal retirement age without a reduction in benefits is $1,220/month ($14,640/annually); the maximum during the calendar year of attaining normal retirement age is $3,240/month ($38,880/annually). No earnings test applies to individuals beginning in the month they attain normal retirement age. In calendar years prior to attaining normal retirement age, the SSA withholds $1 in benefits for every $2 in earnings in excess of the earnings threshold, and $1 in benefits for every $3 exceeding the earnings threshold in the calendar year of attaining normal retirement age.
  • The amount of earnings required for a quarter of coverage is $1,130.
  • The “old law” contribution and benefit base is $81,900.
  • The domestic employee coverage threshold remains at $1,800.
  • For 2010, the national average wage index is $41,673.83.
  • The “bend points” – the dollar amounts in the Social Security Primary Insurance Amount (PIA) formula that is used to determine the Average Index Monthly Earnings (AIME) – for 2012 will be $767 and $4,624. Thus, the Social Security monthly PIA formula will be 90% of the first $767 of AIME, plus 32% of the AIME over $767 and through $4,624, plus 15% of the AIME over $4,624 (and then rounded down to the next multiple of $0.10). An alternative PIA formula producing a lower amount may apply to individuals who have been covered by a retirement plan during employment that is not covered by Social Security.

But “Security” is its middle name…

David BenbowIdentity theft has become so common that someday we will all be someone else. In an attempt to make it a teeny bit more difficult for a few bad apples to prey on the rest of us, there has been a lot of effort to suppress Social Security numbers (SSNs) from computer systems, printed output, and more. Social Security numbers used to be so common that people routinely had them printed on their checks. In fact, my first driver’s license number was my Social Security number.

Now this mainstay of record-keepers everywhere has been corrupted into a gateway for cyber-criminals to ruin your credit while purchasing jewelry and Thighmasters from QVC.

But consider the Social Security number’s humble beginnings. The first SSNs were issued in 1935 as part of the New Deal to track Social Security accounts. They came into existence with little fanfare and no one realized how important they would become outside of the Social Security program.

In the 1950 movie Champagne for Caesar, Ronald Colman’s character faced an all-or-nothing question in the ultimate radio quiz show: “What is your Social Security number?” and got it wrong—unheard of in today’s world.

Before 1986, most people didn’t get a Social Security number until about age 14. I still have my original Social Security card, which bears my 14-year-old signature. My 12-year-old brother went to the Social Security office at the same time and our SSNs differ by 100.

The Tax Reform Act of 1986 required parents to list the SSNs of dependent children over the age of five, so that meant assigning SSNs at younger ages. By 1990, they had to be assigned by age one. Now they issue them at birth. We brought our two babies home from the hospital equipped with Social Security cards.

But the fact that SSNs are so universal has made them an easy way to identify people in the information age. Every payroll file, every statement, every printout was emblazoned with name and SSN.

Not anymore.

The Social Security number has become such a matter of un-Security that you’re lucky if you can even get the last four digits. Curse you, identity thieves!

Looking ahead for Social Security and Medicare

Charlie ClarkIn all the recent talk about changes to Social Security and Medicare it hasn’t always been easy to pick out what’s actually going to be different. One change that was discussed during the debt ceiling debate but does not appear to have been part of the emerging deal would require Americans to attain an older age before becoming eligible to receive benefits from these programs.

Specifically, this change might affect when benefits can start without being reduced for early commencement (for Social Security)—or, for Medicare, when benefits can start at all, except in extreme circumstances.

When changes like this are made, certain age groups may be “grandfathered,” i.e., protected against what could be perceived as adverse changes in the law. Congressman Paul Ryan (R-Wisconsin) proposed several months ago that Americans born in or before 1955 would be unaffected by any changes in our social insurance programs.

This raises at least one obvious question with which policymakers must grapple: Is grandfathering certain older Americans “fair”? For older Americans, “fair” might mean, “I’ve worked all my life and now you changed the game and that ain’t fair.” For younger Americans, it might mean, “I believe that U.S. social safety net programs are going to be around when I’m 65 as much as I believe the moon is made of green cheese, so sure, that’s fair.”

This raises difficult questions, and we’d like to know what you think:

What year would you propose for grandfathering?

Post a comment with your answer.

No more Social Security checks

Timothy ConnorRelax. It’s not what you think. Social Security is still here. But it has officially taken another step into the electronic age. We recently blogged about how the Social Security Administration (SSA) was suspending annual benefit statements this year and cutting the number of recipients of annual statements beginning next year as a cost-saving measure. Well, they are still looking for other ways to cut costs and found another. They rolled it out this past month. May 2011 was the first month where any new Social Security applicant had to choose an electronic payment method. The SSA also announced that anyone currently receiving their federal benefits by paper check must switch to direct deposit no later than March 1, 2013.

Along with the high-tech move came a “high-value” announcement that this decision would save taxpayers roughly $1 billion over the next decade. Aside from the U.S. Postal Service (and perhaps a few retirees set in their ways), we should all find this as welcome news. Every penny counts, especially given the current state of our entitlement programs.

The SSA has issued some press releases and public service videos, including a website at that is intended to assist new applicants and current retirees affected by the changes.

For once, leaving a paper trail behind seems like a wise move.