The Social Security announced changes for 2012 that will affect Social Security beneficiaries and retired persons receiving a retirement income. Millions of beneficiaries will notice the changes by New Years Eve.

3.6% Benefit Increase in 2012

The Social Security Administration has implemented a 3.6% increase for beneficiaries receiving social security and SSI benefits . The increase reflects an increase in COLA (cost of living). The COLA increase is the first positive increase since 2009.

Beneficiaries who receive their benefits on the first of the month will see the increase in their benefit payments on the last day in December 2011. January 1st, 2012 is a holiday, so the benefits will be paid on the last day in December 2011. The increase is welcomed by the beneficiaries dependent on their fixed income and have been affected by the cost of daily living increasing while their benefits remain unchanged.

What is COLA?

COLA is the cost of maintaining your standard of daily living. The purpose of a COLA increase is to ensure recipients aren’t strapped by inflation. If it is more expensive to live the same way, but your income does not increase, people aren’t able to spend money and live as they are used to and budgeted for. Their purchasing power becomes nonexistent.

Citizens aren’t able to put money back into the economy and help promote growth. Their benefits are depleted by not adjusting for the increase in groceries and utilities and not receiving a higher income. We have not seen an increase since 2009 because the country did not see an increase in wage earners income. If there is no wage increase to the Urban Wage Earners and Clerical Workers or CPI-W there can be no COLA.

Changes to Retirement Income

The Social Security Administration announced a plan that will affect a small group of citizens receiving a retirement income. The new 2012 adjustments will result in a change to the maximum amount of income earned by retirees subject to a social security tax. People with a retirement income will notice a change from $106,800 to $110,100. The taxable income increase will only affect a 10 million workers in the US. This increase is based on the increase in average wages.

When the average wage increases, the maximum earning for retirees is increased as well. Retirees expecting to remain tax exempt fall into 2 categories. People reaching NRA, or Normal Retirement Age, after 2012 are subject to an earning cap of $14,640.00. People at “full” retirement age (NRA) in 2012 will notice an earrings cap of $38,880.00.

Socialsecurity.gov

If you are in need of more assistance regarding the 2012 Social Security changes, visit Socialsecurity.gov. Their site provides useful links and answers to frequently asked questions from concerned citizens like you. If you provide your e-mail address, you can sign up to receive updates about Social Security changes. Your local Social Security office also provides useful resources and personnel to address your concerns.  Here’s a handy resource to find the closest Social Security office location.

photo credit: Barack Obama

Having your social security card lost or stolen can be a frightening experience. After all, every piece of our human existence is tied to that nine digit number. Most of the time, if you have your social security number memorized or written down, the card is not needed. There is no law requiring one to have an actual social security card. But what happens when it is needed, say for applying for a drivers license or passport, and you do not have the card anymore? Getting a replacement card is not as daunting a task as you might think.

Where to Start on Finding Social Security Card

To begin, you will need to fill out an application for a new social security card. Applications are available at your local social security office. The application can also be printed from the social security website by visiting www.ssa.gov. The link for replacing a social security card is on the left side of the page under the “more information” heading. By clicking that link, it will take you to the page with instructions for applying for a new card, and the link for the printable Application for a Social Security Card (form SS-5).

Supporting Documents

Once you have completed the application for a social security card, you will need to gather some information about yourself. There are two required pieces of information that you must prove in order to apply for a new card. The first bit of information required is to prove your identity, and the second is to prove your US Citizenship.

Identity Information

In order to prove your identity you must show a document that includes specific information about yourself. The information needed is your name, age or birth date, and a photo. The document must be current. Some examples of acceptable documentation include: drivers license, non-drivers id card, or passport. Whatever you choose to use, must be the original documents. Copies are not accepted.

Citizenship Information

The second bit of information you need to provide is something to show that you are a US citizen and therefore able to apply for a social security card. Acceptable documents include but are not limited to, a US passport, a US birth certificate, or a certificate of citizenship. For a full list of acceptable documentation, you can visit the website at www.ssa.gov or contact your local social security office. Again, whichever form of identification you provide, must be the original, not a copy.

How to Apply For a New Social Security Card

Once you have filled out the required application and found all of the necessary documents, you can now apply for a new social security card. This can be done in one of two ways. One, visit your local social security office and apply in person. Two, mail all of your documents and application to your local social security office. Any documents you send, will be mailed back to you once verified.

To find your local social security office, again visit www.ssa.gov and click on the link to find your local office. Enter your zip code and the closest office will be displayed.

Once everything is approved, you can expect to receive your new card in about two weeks.

Photo Credits: unm.edu

Every year the Social Security Administration sends out a summary of projected Social Security benefits to every American citizen who works, or has ever worked. This summation is an estimation of the amount of money you will receive from Social Security based on the age you might retire and how much you have earned by working thus far in your life.

This figure is calculated by using the PIA, or Primary Insurance Amount. This is the basis for all benefits that will ultimately be paid to every individual and / or their beneficiaries. And, like so many numbers in the world of finances, it is variable. It depends on the age when you choose to retire and your AIME, or Average Indexed Monthly Earnings.

First a few definitions:

AIME – Average Indexed Monthly Earnings. To determine the Social Security retirement or disability benefits of an insured worker, that worker’s earnings are adjusted to take into consideration the changes in wages during his or her employment history. This is done so that Social Security benefits take into account the rise in the cost of living. The years in which the most money was earned are the years utilized to calculate the average. The number of years used can be up to thirty-five.

FRA – Full Retirement Age, also known as the normal retirement age, regulates when you can receive your whole retirement benefit. If you choose to retire earlier than the normal retirement age, you will receive a lesser portion of your benefits. Of course you can also increase the amount of benefits you will receive by waiting to retire until after normal retirement age. But how exactly do you figure out your Full Retirement Age?

Fortunately, this answer is a simple one. If you were born…

• in1960 or later, your FRA is 67.
• between the years of 1955 and 1959, your FRA is 66 plus 2 months for each subsequent year.
• between the years of 1943 and 1954, your FRA is 66.
• between the years of 1938 and 1942, your FRA is 65 plus 2 months for each subsequent year.
• in 1937 or earlier, your FRA is 65.

Now you are ready for a few calculations. In 2010, the following formula applied for determining your Primary Insurance Amount:

• Ninety percent of the first $749 of your Average Indexed Monthly Earnings
• Thirty-two percent of the next $749-$4,517 of your AIME
• Fifteen percent of any amount above $4,517

These figures are called bend points and, as mentioned earlier, are changeable year after year. If you add the sum of these three percentages together (and round down to the next lowest multiple of $0.10), you will have your Primary Insurance Amount.

Your Primary Insurance Amount will also change based on a cost of living adjustment, future years where you may make higher wages, and the age that you begin receiving retirement benefits.

Although calculating the benefits you will eventually receive from the Social Security Administration is a somewhat arduous task, it is comforting to know that there is a plan in place for all of us when we unavoidably reach the age when it will be of need.

photo credit: freestone

Social Security, also known as OASDI (Old Age, Survivors, and Disability Insurance) or RSDI (Retirement, Survivors, and Disability Insurance) is, put simply, a social welfare program that provides the following assistance to citizens of the United States:

• Disability Benefits
• Retirement Benefits
• Survivors/Death Benefits

This program is financed through the Federal Insurance Contributions Act (FICA), also known as payroll taxes. America’s Social Security Program is the largest federal government program worldwide and also the largest expense in the federal budget. Social Security currently keeps approximately twenty million Americans out of poverty. Social Security helps many many individuals and families. But, as with an social program, it can only help so much. Let’s look at the maximum benefits that can be received for each of the three primary benefits:

Disability Benefits

Disabled workers who meet specific medical stipulations are eligible to receive benefits from Social Security. Such workers must undergo the following tests to determine eligibility: A recent work test that takes into account your age at the time you because disabled, and a work duration test that proves you worked long enough to be eligible.

The maximum monthly disability benefit depends on the worker’s average earnings over his or her lifetime. Last year the average funds received per month by a disabled worker was $1,064. A typical worker with dependents received $1,803. Benefits paid out to wage-earners and families may be decreased if other benefits are being received (such as Workers’ Compensation).

Retirement Benefits

Insured workers can also receive retirement benefits through the Social Security Administration once they reach the age of 62. The amount of possible retirement benefits depend on the worker’s AIME, or Average Indexed Monthly Earnings, and his or her FRA, Full Retirement Age. Basically, the Social Security Administration takes the average amount of money that you earned during your most lucrative working years and then adjusts it to account for the cost of living. The government then looks at the year in which you retired. If you retired earlier than is typical, you will receive fewer benefits. If you retired later than is normal, you receive more.

The maximum amount a retired worker can receive per month depends primarily on his or her age at retirement. An individual retiring this year at the Full Retirement Age can earn a maximum of $2,346 each month.

Survivors (or Death) Benefits

Social Security provides death benefits to surviving spouses and dependents of wage-earners who have made sufficient contributions into Social Security during their lifetimes. All American citizens in the workforce must pay Social Security taxes and a portion of those funds translate into benefits for survivors.

The more a worker contributes to the Social Security System, the greater his or her family’s benefits will be. Typically, the following guidelines apply:

• The spouse of the deceased at Full Retirement Age or above receives 100% of the deceased worker’s basic benefit amount.
• The spouse of the deceased over 60 but under the FRA is eligible for 71-99%.
• The spouse of the deceased of any age caring for a child under 16 receives 75%.
• Children of the deceased worker get 75% of the total benefit amount.

There is also a limit imposed upon a family – generally 150-180% of the deceased worker’s benefit amount.

photo credit: Looking&Learning

What are Social Security Survivor Benefits? Survivor benefits are funds payable to the surviving spouse and dependents of a worker who paid enough into the social security system during his or her lifetime. All workers pay Social Security taxes and some of that money goes toward providing these benefits for families in need.

Social Security Survivor Benefits

Who Receives Social Security Survivor Benefits?

The following family  members are eligible to receive social security survivor benefits:

Widows and Widowers

• A surviving spouse aged sixty and up
• A disabled surviving spouse at least fifty years of age
• A surviving spouse responsible for a child who is under the age of sixteen or a disabled child receiving social security benefits

Divorced Spouses

• An ex-spouse at least sixty years of age who was married to the deceased for ten or more years
• A disabled ex-spouse aged fifty and up
• An ex-spouse caring for an eligible child
• An ex-spouse who has remarried if that marriage happened after age sixty (fifty for disabled ex-spouses)

Children

• Unmarried children under the age of eighteen
• Children under nineteen who are full-time students
• Children eighteen and older if severely disabled before age 22

Parents

• Parents of the deceased worker if they depended upon said worker for half or more of their income

How (and How Much) Social Security Survivor Benefits Does One Receive?

Workers pay social security taxes throughout their lives, thus earning credits toward their future social security benefits. No worker needs more than a decade of work to be eligible for these benefits. The amount the family will receive depends on the worker’s average earnings over his or her lifetime. Typically children will receive seventy-five percent of the total benefit amount and spouses anywhere between seventy-one and one hundred percent, depending upon age and aforementioned variables. A family is generally limited to receiving between one hundred fifty and one hundred eighty percent of the total benefit amount.

There is also a one time lump sum payment in the amount of $255 payable to the deceased worker’s spouse or child as long as certain requirements are met.

It is imperative to apply for benefits quickly. Often money is paid from the time of application, not from the time of death. Apply directly through the Social Security Administration Office. The following documentation will be needed: Proof of death, social security numbers for all family members, birth and marriage certificates,W-2 forms for most recent year, bank number and account number, and divorce papers if applicable.

Why are  Social Security Survivor Benefits Important?

Losing a spouse, losing a father, are two of the worst possible life events. Though no one wants to think of it, especially during such a trying time, the loss of a family’s primary wage-earner can mean disaster for the family. Just about everybody qualifies for these benefits and ninety-eight of every one hundred children are eligible for survivor benefits if a working parent dies. The Social Security Survivor Benefit Plan is there to help families suffering through these losses by providing them with a stable income thereby ensuring them a brighter tomorrow.

Will it happen?  Lawmakers have been busy and a lot of the buzz has been on payroll taxes and Social Security.  As a boomer, do you have a reason to be concerned.  The simple answer: maybe.

photo credit: Third Way

A claim too good to be true? If the recent agreement on taxes forged between President Obama and Congressional Republicans becomes law, payroll taxes would be lowered by 2.0% in 2011. According to the Joint Committee on Taxation, that would cost the federal government $111.7 billion. The White House claims this drop in tax revenue would have no impact on Social Security’s solvency.

In response, some legislators and analysts are raising their voices, worried that the proposed payroll tax holiday could be a harbinger of unpleasant things to come for America’s retirement program.

Is there a way that wouldn’t affect Social Security?

Good question. As Social Security (and Medicare) rely on payroll levies for a great deal of revenue, chopping those taxes down from 6.2% to 4.2% in 2011 would seem to be ruinous.

The federal government’s answer to that question: reimburse the loss to the Social Security Trust Funds using general revenue. That idea worries Social Security advocates, and it also begs a question.

What Should We Be Worried About?

What if the planned payroll tax cut becomes permanent? It could happen, especially with Republicans in control of the Senate. The EGTRRA cuts were conceived as temporary cuts, and they are starting to seem more permanent with each passing year.

Last week, Sen. Mike Johanns (R-NE), Sen. Bob Corker (R-TN) and Rep. Ted Deutsch (D-FL) all told NPR that they felt Republicans would try to make the payroll tax reduction permanent during 2011. Deutsch warned that a move to fund Social Security with general revenue will hearten “those who [want] to move away from our longstanding, successful Social Security program to privatization and to benefit cuts. It will enable them to make those arguments in a way that they’ve never been able to make them before.”³

Nancy Altman, co-chair of the advocacy group Social Security Works, thinks a lasting cut in payroll levies could end up making Social Security’s shortfall twice as large as it is now. She warned NPR that with the probable extension of EGTRRA and JGTRRA, “we see now that it’s very hard once a tax cut is in place to repeal it,” and told USA TODAY that “it’s unfathomable that this is going to last only one year.”^3,4

By the way, the 2011 tax break might be less prevalent than assumed.

The federal government says a 2% payroll tax cut could provide tax breaks as large as $2,000 in 2011 for American workers. But as Bloomberg Businessweek reported on December 10, any Congressional vote might happen too late for some employers to act. Last year, the IRS notified payroll departments about 2010 tax tables on November 20. We are well past that date.^2,3

Incidentally, the envisioned payroll tax cut is for workers only, not businesses. The payroll tax would stay at 6.2% for employers in 2011.

Some people are genuinely surprised when they learn that their social security income can be taxed. In certain instances, they may not have factored tax payments into their retirement planning. In other instances, people may continue working even though they’re eligible for social security benefits.

photo credit: mikeg626

Tax Rates and Social Security

There are a few factors that will be used to determine what of tax rates you’ll follow when paying on social security. The two top ones are total income and marital status. When it is time to pay these taxes, you will need to pick up a Form SSA-1099. The form will outline total benefits, but if you wish to know how much is taxable will require doing some calculations.

Social Security as Your Only Source for Income

Before looking at how much might be taxable if you are still working, you need to understand something first:

In fact, you may not need to file a federal income tax return. The IRS includes monthly survivor and disability benefit, but doesn’t include additional security income payments, which aren’t taxable. It is the other income that comes in that may subject you to taxes on a portion of your government benefits.

The Numbers and Social Security

If you want to know your potential tax liability, you should start by adding about half of your Social Security benefits to other income. There are additional factors that must be accounted for at this stage. You’ll need to record tax-exempt interest earned, savings bond interest, and other benefits that could be excluded for whatever reason. If you come up with a figure that larger than the base for your filing status, then you’ll to pay taxes on the difference.

Base numbers are $25,000 for a single head of household or widow/widower with a dependent, $25,000 for married filing separately who did not live together during the tax year, and $32,000 for married couples filing jointly. Finally, there is no charge for married persons filing separate returns that who lived together during the tax year.

All of this makes up the raw data when you want to find out how much your social security will be taxed. It’s possible for up to half of your Social Security benefits to be taxed if you’re a single filer and your total income plus half the benefits exceeds $34,000. The number is $44,000 if you’re married and have filed jointly.

Can’t Avoid It

There’s no getting around the fact that you’ll have to pay taxes on Social Security if you income falls into the sort of rates and guidelines outlined here and in the IRS’s latest tax charts. You’ll really have to do the math to see where you fall. Check out the IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits for more details.

It is important to take the time find out as much as you can so you pay the appropriate taxes on income received during a given tax year, so you do not take off more of your benefits than is necessary.

Social Security retirement benefits are available to American workers who have paid into the system throughout their working years. Originally established after the Great Depression, Social Security is a supplemental retirement program designed to ensure retired citizens have some level of income from which to live after they stop working. Social Security benefits make it possible for all individuals who have worked and paid into the Social Security fund to count on a benefit check that will provide income to cover living expenses and other financial needs once they are retired.

Give me my check!

For many people Social Security is the only retirement benefit that they can count on, while others will add this income to distributions from other retirement accounts they have funded throughout the years. Here we take a closer look at some common questions asked about Social Security retirement benefits.

How old must you be to apply for benefits?

When you can apply for benefits will largely depend on your unique situation. The official retirement age is determined by the year in which a person was born. For example, those born after 1960 have an official retirement age of 67. That being said, a person can begin receiving benefits when they are 62 years of age or at age 60 if they are a widow or widower who has not remarried.

How long does it take to get your first social security check?

It is recommended that individuals contact Social Security three months prior to the date they would like benefits to start to go over options available. Once an application for benefits has been submitted, the applicant can expect benefits to begin one month following their entitlement month. If your entitlement date (the period when an individual meets the minimum age of retirement) is in July, your first social security check will arrive in August.

How do you apply for benefits?

When you are ready to apply for Social Security benefits, you can apply in a number of ways. For individuals living in the United States, applications can be taken over the phone, online or by visiting a local Social Security office. Individuals who do not reside within the United States or any of its territories must contact the nearest U.S. Social Security office, Embassy or consulate.

Are there drawbacks to collecting early retirement?

It is recommended that any individual who is able to delay collecting Social Security until their retirement age do so. When you begin collecting early retirement (age 62) your benefit check will be less than if you had waited until your retirement year. When considering what age to begin benefits it is very important to look at your own financial situation and needs to better determine if retiring early is an option that should be considered.

When it comes to Social Security retirement benefits, there are rarely questions that have a simple “one size fits all” answer. There are many factors that go into how much money you are entitled to, how much money you will receive and when. You must also consider other sources of income and how that might affect your financial situation throughout retirement. One thing is certain for all individuals; retirement planning is very important to ensure maximum benefits and protection of assets which you will rely on for the remaining years.

Supplemental Security Income, also known as SSI, is an income supplement program Federally funded from general tax revenues. The monies are used to help disabled, blind and aged people who have little or no income to meet basic needs such as shelter, food, and clothing. The funds do not come from Social Security Taxes.

photo credit: C. G. P. Grey

Rules of SSI

Your income and your accessibility to resources will predict your eligibility for SSI benefits. Social Security will not count all of your income for qualification of benefits but will check on any wages, benefits, or pensions you are currently receiving. The determination will also be made based on your location.

The resources you have access to will include any real estate, your bank accounts, cash on hand, and investments in stocks and bonds. Typically an individual can qualify for benefits if resources are worth no more than $2000 for single individuals, $3000 for married couples.

Eligibility Rules

Anyone aged 65 or older or those who are blind or disabled are eligible for receiving SSI Disability. These individuals also must have limited incomes and other resources to qualify. All eligible applicants must be a US citizen of the 50 states, the District of Columbia, or the Northern Mariana Islands, or a national. Eligible applicants may also fall into a category of an alien, provided they are not actively warranted for deportation.

Qualified individuals must apply for all other cash benefits for which they qualify including Social Security benefits and pensions. All individuals must complete and file an application, agreeing to give the Social Security Administration permission to request financial records on their behalf.

Who Is Not Eligible for SSI Disability

There are several individuals who are deemed as ineligible to receive SSI benefits. Some of those groups include anyone who has a warrant against them for a felony crime, those who have avoided custody after a conviction of a felony crime, and those who violated a condition of parole or probation as imposed by State or Federal law. Should an applicant receiving SSI benefits be jailed or imprisoned. They will not be eligible to receive benefits for a full calendar month of incarceration.

Applying for Supplemental Security Income

photo credit: Art By Steve Johnson

You can complete the application for SSI online at the Social Security Administration website (http://www.socialsecurity.gov) or by calling 800-772-1213 to schedule an appointment with an SSA representative.

Parents or guardians for children under the age of 18 can file the application if the child is blind or disabled. Individuals will need to provide items to the office at the time of application. A list of necessary items includes:

Appealing a Negative Decision

In the event you are turned down for benefits you believe you are entitled to receive, you have a right to file an appeal with the Social Security Administration. You can choose an attorney to handle the case of appeal to try and get a reverse decision.

Good news for boomers who are also Veterans.   You may qualify for an additional increase in your Social Security Benefits.  Here’s a rundown of the qualifications:

photo credit: US Army Africa

Since 1957, if you had military service earnings for active duty (including active duty for training), you paid Social Security taxes on those earnings. Since 1988, inactive duty service in the Armed Forces reserves (such as weekend drills) has also been covered by Social Security.

Under certain circumstances, special extra earnings for your military service from 1957 through 2001 can be credited to your record for Social Security purposes. These extra earnings credits may help you qualify for Social Security or increase the amount of your Social Security benefit.

Special extra earnings credits are granted for periods of active duty or active duty for training. Special extra earnings credits are not granted for inactive duty training.

You May Qualify If You Served:

• From 1957 through 1967, we will add the extra credits to your record when you apply for Social Security benefits.
• From 1968 through 2001, you do not need to do anything to receive these extra credits. The credits were automatically added to your record.
• After 2001, there are no special extra earnings credits for military service.

How You Get Credit For Special Extra Earnings

The information that follows applies only to active duty military service earnings from 1957 through 2001. Here’s how the special extra earnings are credited on your record:

Service in 1957 Through 1977

You are credited with $300 in additional earnings for each calendar quarter in which you received active duty basic pay.

Service in 1978 through 2001

For every $300 in active duty basic pay, you are credited with an additional $100 in earnings up to a maximum of $1,200 a year. If you enlisted after September 7, 1980, and didn’t complete at least 24 months of active duty or your full tour, you may not be able to receive the additional earnings. Check with Social Security for details.

You can also look here for good deals and discounts on Veteran’s day.