Because my column usually has a one- or two-week lead time before publication, it’s almost impossible for me to give my readers any real “news” about Social Security. And this was demonstrated once again recently, when the Social Security Administration announced the cost-of-living adjustment, or COLA, for 2012 Social Security checks.
In case you were vacationing in Borneo and missed it, monthly benefits will go up 3.6 percent beginning with January’s Social Security checks. That’s now old news. But other increases tied into the annual COLA adjustment didn’t make most news stories. I’ll share them here.
But first, I must get something else out of the way. Every single time I mention the annual cost-of-living increase in this column, I’m flooded with emails from readers complaining that it’s not enough. I’ve explained countless times in this space how the COLA is computed. But it does no good. People still gripe that they should get more money.
So this time, rather than use up half of this column explaining a process people don’t want to believe anyway, I’m going to refer you to the source. If you want to know how the annual Social Security COLA is figured, visit SocialSecurity.gov/COLA.
And here’s an interesting tidbit about Social Security COLAs that demonstrates the power of the senior-citizen lobby in this country and how politicians will bend over backwards to court their votes: The first increase for 2012 will be paid in January.
On the surface, that may seem to make sense. But remember that Social Security benefits are always paid one month in arrears. In other words, the check that comes in January 2012 is actually the payment for December 2011. So why do folks start getting their 2012 COLA increase on their December 2011 Social Security check?
Well, you have to go back about 20 years or so. At that time, COLA increases were effective with the month they were due. Had that old law never been changed, people would have been scheduled to get their first 2012 COLA increase on their January checks, which are paid in February.
But a couple of decades ago, seniors got all in a huff about this. They mistakenly thought they were being cheated out of one month’s COLA because they didn’t get their first increase until February. Rather than simply explain the logistics of the one-month delay in benefits, Congress knuckled under and decided that henceforth, COLA increases would be effective with the December payment of the prior year (payable in January of the next).
In addition to increases in monthly benefits, there are other changes to Social Security that are important to many people.
Let’s start with people still working and paying Social Security taxes. If you’re fortunate enough to be making a six-figure salary, you’ll be paying slightly higher taxes in 2012. The Social Security taxable earnings base is going up from $106,800 to $110,100. So people making that kind of money will be pumping a few more nickels into Social Security’s coffers next year.
One other annual change affects only people trying to get the necessary credits they need to qualify for Social Security in the first place. Most people who are working earn four credits per year. In 2011, you earned those four credits once you made $4,480. In 2012, you won’t get those credits until you make $4,520. (You actually will get one Social Security credit for each $1,130 you earn in 2012. But no one can earn more than four credits per year.) To qualify for retirement benefits, you generally need 40 credits. Fewer credits may be needed to get Social Security disability payments or for your family members to get survivor benefits if you die.
Another annual increase impacts people who are getting Social Security checks but are still working. If you’re under 66 years old, there’s a limit to how much money you can make each year before your Social Security benefits are reduced. In 2012, you’ll be able to make $14,640 per year before seeing any reductions. That’s an increase of only $480 above the 2011 limits. For each two dollars you earn above the $14,640 limit in 2012, one dollar must be withheld from your Social Security checks.
There’s a higher limit for working retirees in the year that they turn 66. In 2012, they can make up to $38,880, with no reduction in benefits, from January up to the month of their 66th birthday. Once they reach 66, no limit exists on the amount of money they can make while getting Social Security checks. (The age-66 limit is $37,680 in 2011.)
People getting Social Security disability benefits get the same 3.6 percent increase as retirees. And one other minor change might impact them. Disability benefits are paid to anyone who is unable to work at a “substantial” level. The law used to define that level as a job paying at least $1,000 per month. In 2012, that threshold goes up to $1,010. In other words, if you get disability benefits and are trying to work, you can make up to $1,010 per month next year, and you’ll still generally be eligible for your disability payments.
Another COLA increase impacts folks getting Supplemental Security Income, or SSI payments. The standard federal SSI payment amount will go up in 2012, from $674 per month to $698. But many states add money to the basic federal payment. Some states pass along the increase in their state supplement, but some don’t. So depending on where you live, your monthly SSI check may or may not go up.
SSI is a federal welfare program managed by the Social Security Administration. It makes monthly payments to low-income seniors and disabled people. As I constantly try to remind my readers, SSI is not a Social Security benefit, and SSI payments are not funded out of Social Security taxes.
If you have a Social Security question, Tom Margenau has the answer. Contact him at firstname.lastname@example.org.
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