No one knows about a 2016 COLA yet

Articles guessing about a Social Security cost-of-living adjustment (COLA) for next year are starting to appear.

No matter what you read or hear, no one knows 2016 COLA information yet and no one will know until approximately mid-October. Last year, Social Security announced 2015 COLA details on October 22, 2014.

COLAs for Social Security benefits are based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year.

The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs.

The third quarter of the year ends September 30. Until CPI-W information is available, any cost-of-living adjustment (COLA) amount mentioned for next year is a guess.

 

 

 

Are SSA amounts based on where you live?

Q: Do Social Security retirement amounts change based on what state you live in?

A: No. Your retirement amount is based on your personal work history over many years and your age when starting benefits, not on where you live. It will not change if you move to a different state.

Your best 35 years of work are key when your retirement benefit is computed. These best 35 years, often including years immediately before retirement but selected from your full work history, are weighted for inflation and used to compute your Social Security retirement amount as if you were full retirement age (FRA). If you do not have 35 years of work, zeros are added in to reach 35 years.

When your full retirement age amount is known, the specific amount for the month you are starting Social Security is determined by reducing or increasing the FRA amount, depending on if you are younger or older than FRA for the month when benefits start. Go to the SSA Retirement Planner section to estimate your own Social Security retirement amount.

Once receiving Social Security benefits, any cost-of-living increase is computed nationally based on changes in a consumer price index from one year to the next, not where you live.

In a related manner, benefits to you if disabled or survivors benefits to your family if you die are also based on your personal work history and not where you live.

Your Social Security work record is based on employer W-2 reports or your Schedule SE tax return if self-employed. Check it for accuracy by creating a personal my Social Security account at http://www.socialsecurity.gov/myaccount/ and viewing your SSA Statement.

Earnings for 2014 will not show on your record until approximately October 2015. It is very important for your future benefits that your work record be accurate. If it has an error, contact your local office to correct it.

Receiving Social Security? Have you moved?

When benefit amounts change for a person receiving either Social Security or Supplemental Security Income (SSI), a letter is sent by regular Post Office mail telling the new amount and reasons for the change. 

As routinely done, recently the Social Security Administration has been mailing letters to beneficiaries explaining the 2015 cost-of-living increase benefit changes. Many of those letters cannot be delivered because Social Security records had an old address and Post Office mail forwarding requests were either not done or had expired.

One result is that the people involved do not receive important benefit information sent to them unless they contact Social Security to ask about it. These recontacts create more work for both the person and Social Security representatives. 

Have you moved this year while receiving either Social Security or SSI benefits? Did you report your new mailing address so that your records stay accurate? If not, do this now. 

Update your address in several ways.  

Online: Social Security beneficiaries can update their address online at any convenient time if they have a personal my Social Security account. SSI recipients cannot update their address this way but other my Social Security services such as getting an online letter to prove your benefit amount remain available. For your convenience, this is the suggested method. Create your my Social Security account at www.socialsecurity.gov/myaccount/.

By phone: you can telephone the Social Security national toll-free number, 1-800-772-1213 / TTY 1-800-325-0778, from 7:00am – 7:00pm local time. National numbers are answered at different sites across the country. Representatives there can help you with other Social Security business as well.  

In person: You can phone or visit your local Social Security office. Local office hours vary but most have public hours of 9:00am – 3:00pm on Monday, Tuesday, Thursday and Friday and 9:00am – noon on Wednesday. Learn local office hours and locations here, in the “Find an Office” section. 

Even when your benefit payment continues going to the same bank, credit union or other financial institution, be sure to notify Social Security of mailing address changes. This helps you. It helps Social Security. 

By whatever method you choose, keep your mailing address current when you receive Social Security or SSI benefits. Important information is mailed to you during the year. Make sure you receive the news.

Did Social Security always have a COLA?

With the 1.7 percent cost-of-living adjustment (COLA) for 2015 about to begin, it is worth noting that many pensions do not have a cost-of-living adjustment (COLA) provision. Unlike the inflation protection provided by Social Security retirement, survivors and disability benefits, for pensions lacking a COLA your starting amount is your final amount, even if you receive the pension for many years. 

One of the many valuable aspects of Social Security benefits, the annual, automatic review of Social Security amounts for a possible cost-of-living adjustment (COLA) is now such an accepted feature of the program that it is difficult to imagine a time when there were no COLAs. However, such a time existed. Social Security beneficiaries did not originally receive cost-of-living adjustments.  

Although the first SSA benefit was paid in January 1940, the first cost-of-living adjustment related increase was not until 1950 followed by a second in 1952. Part of the 1950 Amendments, the first Social Security COLA was signed into law by President Truman. Neither of these two increases was automatic. Both times, Congress enacted special legislation for the purpose.  

Automatic Social Security COLAs began in 1975, based on 1972 legislation. Signed into law by President Nixon, this legislation established automatic COLAs based on the annual increase in the consumer price index, if any. 

Since then the automatic cost-of-living adjustment has increased Social Security benefits in almost all years. Learn COLA percentages for 1975-2014 at www.socialsecurity.gov/cola/automatic-cola.htm 

The 1.7 percent cost-of-living adjustment for 2015 begins with benefits that more than 58 million Social Security beneficiaries receive in January 2015. Increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2014.

Details about the 2015 COLA are here.

More than monthly payment amounts change due to a COLA. Other related changes are here.

 

 

 

2015 SSA taxes and taxable earnings base

Q: How much does a person have to earn in 2015 before withholding for Social Security taxes end? 

A: In 2015, the maximum amount of earnings subject to Social Security tax is $118,500. In 2014, this amount was $117,000. People earning above the annual maximum taxable level stop paying SSA payroll tax once that amount is reached.   

Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum. Medicare payroll tax continues on all earnings.  

The taxable earnings level can change annually based on changes in the national average wage index. To reflect the general rise in the standard of living over a working lifetime, changes to this average wage index are used when future SSA benefits are computed.   

From 1937 to 2015, changes to the amount of earnings subject to Social Security earnings tax are here. 

The 2015 Social Security tax is set by statute at 6.2 percent for employees and employers, each. An individual with wages equal to or larger than $118,500 will pay $7,347.00 towards the SSA retirement, survivors and disability programs in 2015, and his or her employer would contribute the same amount. The tax rate for self-employment income in 2015 is 12.4 percent. 

People earning less than the 2014 maximum tax base will not pay more in 2015 because SSA and Medicare tax rates are not changing. They have not changed since 1990. 

The Medicare tax rate is an additional 1.45 percent on all earnings so the total employee and employer tax rate is 7.65 percent. For the self-employed, it is 15.30 percent. 

Historical Social Security and Medicare tax rates are here.

Medicare Part D and other scam warnings

The Medicare Part D (prescription drug coverage) plan open enrollment period is from October 15 to December 7.   

Part D open season is an important time. You should review your existing Part D plan to be sure it fits your needs. One that was previously good might not be your best choice now. Learn about Part D at the Medicare website, www.medicare.gov. To find a Part D plan, go to the “Find health & drug plans” section. 

Now is also a time to be especially alert for scams targeting you.  

For example, one making the rounds now involves people being called by a scammer. The crook asks for personal information, such as your Social Security number and birthdate, so that they can allegedly send you an updated Medicare card. Do not give out this type of information. Protect yourself. 

Medicare Part D (prescription drug coverage) coverage information is not on your Medicare card since Part D policies are sold by private insurance companies.  

Social Security does not make cold calls or send emails to you offering a Medicare card. Replacement Medicare cards are not sent unless you ask for one. You can request one online or by contacting Social Security directly, at no cost, but you are doing the requesting.  

Medicare is not the only popular basis for scams. 

Social Security does not make cold calls to verify your bank account for direct deposit. Do not give out bank account information. If you get a letter saying that SSA has changed where your payment goes, and you did not make the change, contact Social Security immediately.  

The upcoming cost-of-living adjustment (COLA) increase is another scam topic. Social Security does not cold call for personal information related to the COLA. If you receive Social Security or Supplemental Security Income (SSI), no special update is needed from you. The COLA will be received automatically. 

When someone contacts Social Security, whether by phone or in-person, the SSA representative asks questions to verify identity. This helps protect you. However, the big difference is that you contacted SSA first. This is not an unexpected cold call to you. 

For online information, be sure you are at the real Social Security website, www.socialsecurity.gov. There are no charges for program services. Guard yourself online too.

Social Security Announces 1.7 Percent Benefit Increase for 2015

Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 64 million Americans will increase 1.7 percent in 2015, the Social Security Administration announced today. 

The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in January 2015. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2014. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics. 

Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000. Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum.  

Information about Medicare changes for 2015 is available at www.medicare.gov 

The Social Security Act provides for how the COLA is calculated. To read more, please visit www.socialsecurity.gov/cola 

A fact sheet showing the effect of COLA related automatic changes for 2015 is here.

The first Social Security retirement payment

Today is the anniversary of a major event in Social Security history. 

On January 31, 1940, the first monthly recurring Social Security retirement check was issued, going to Ida May Fuller of Ludlow, Vermont.   

Born in 1874, Ida May Fuller worked as a schoolteacher before becoming a legal secretary in 1905. Never married, she worked for about three years under the Social Security program before retiring in 1939 and starting her Social Security retirement at age 65 in January 1940. 

She was the first beneficiary of recurring monthly Social Security payments. Her retirement amount was $22.54 per month. 

Final decisions on early applications for Social Security benefits were completed in Washington D.C. with benefit amounts then certified for payment by the Treasury Department. Claims were grouped in batches of 1,000 and a Certification List for each batch was sent to Treasury.  

Ms. Fuller’s claim was the first one on the first Certification List. As a result, the first Social Security monthly benefit, check number 00-000-001 dated January 31, 1940 was issued to her.

For her, and the millions of other Social Security beneficiaries like her, the amount of that first benefit check was the amount they could expect to receive for life. It was not until 10 years later with the 1950 Amendments that Congress first legislated an increase in benefits. Automatic cost-of-living adjustments (COLAs) did not begin until 1975.

Ms. Fuller lived to be 100 years old, dying in 1975 with a secure place in Social Security history.

Here is a photo of Ms. Fuller from October 1950, when the first cost-of-living adjustment was received.

 Ms. Fuller received the first monthly Social Security retirement check but not the first SSA payment. More about this next week.

 

Your letter with 2014 SSA amounts – more information

Yesterday I wrote about an important letter going to everyone receiving Social Security retirement, survivors or disability benefits.  If you receive Social Security, the letter tells you specific information about changes to your personal benefit amount due to the 2014 cost-of-living increase. Details about the letter are in yesterday’s post.

Keep this letter with your other important financial documents. You can use this letter when you need to prove the amount of your Social Security benefit amount. 

As mentioned yesterday, you, your spouse and your friends will probably receive your individual letters on different days. If you have not received your own letter, you should receive it soon.

Moving to today’s topic, what if you do not receive this letter?  

As with all letters to you during the year from Social Security, the letter about your 2014 amount is mailed to your address as shown on Social Security records.

If you moved but did not report your new mailing address directly to Social Security, your letter will be delayed by the time needed for the Post Office to forward it.

Even when your benefit payment continues going to the same bank, credit union or other financial organization without change, it is important to inform Social Security of changes to your mailing address.

Are you a snowbird? You can easily change your mailing address with the seasons while leaving your bank information unchanged.

Now is the time to update your mailing address, if needed. Contact Social Security by calling the national SSA toll-free number, 1-800-772-1213 or TTY 1- 800-325-0778, to report your new address.

People receiving Social Security benefits can go online and print a letter to verify their amount, and even update their address, after creating a personal my Social Security account. Before establishing your own account, read How We Verify and Protect Your Identity in the my Social Security section. It explains the questions that you will be asked.

Today’s post is obviously more for people receiving Social Security benefits now. However, a my Social Security account is useful for other purposes even if you are not receiving benefits yet.

Whether or not receiving Social Security benefits right now, learn more at http://www.socialsecurity.gov/myaccount/ and create your my Social Security account today.   

 

 

How much is your 2014 Social Security benefit?

The 1.5 percent cost-of-living adjustment (COLA) will begin with benefits that more than 57 million Social Security beneficiaries receive in January 2014.

Across the entire country, everyone receiving a Social Security retirement, survivors or disability benefit will receive a letter about the 1.5 percent cost-of-living increase for 2014. This letter will explain how much they will get per month in 2014 along with other important information.

Keep this letter. It is very important. Use it when you need to prove the amount of your Social Security benefit. Whether used to obtain financial help from housing and energy assistance programs or to qualify for a new vehicle bank loan, keeping this letter will simplify the process. Put it with your other important financial documents.

The letter contains much more than just the amount of your Social Security amount. It includes your monthly benefit before any deductions, the amount deducted for your Medicare Part B coverage, other deductions if any, and the net amount received each month. On the letter, this information will look something like this:

 How Much Will I Get And When?

Your monthly amount (before deductions) is ___________.

• The amount we deduct for Medicare medical insurance is ___________.

(If you did not have Medicare as of Nov. 14, 2013

or if someone else pays your premium, we show $0.00.)

The amount we deduct for your Medicare prescription drug plan is ___________.

(If you did not elect withholding as of Nov. 1, 2013, we show $0.00.)

The amount we deduct for voluntary federal tax withholding is ___________.

(If you did not elect voluntary tax withholding as of

Nov. 14, 2013, we show $0.00.)

After we take any other deductions, you will receive

Perhaps you already received this letter. If not, you should receive it soon. It is likely that you, your spouse and your friends will receive your individual letters on different days.

 Keep this letter with your other important financial documents. It is very important. Use it when you need to prove the amount of your monthly Social Security benefit.