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.