What's New In Social Security?
On Wednesday, October 30, 2013, acting Press Officer, Mark Hinkle issued a press release on the Social Security website announcing that “Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 63 million Americans will increase 1.5 percent in 2014.”
The announcement continued, “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. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2013.”
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 $117,000 from $113,700. Of the estimated 165 million workers who will pay Social Security taxes in 2014, about 10 million will pay higher taxes as a result of the increase in the taxable maximum.
OK, some people give a little more, some people get a little more. That’s not news, but, to put it in perspective, the average monthly Social Security payment will increase by $19 due to a 1.5 percent cost-of-living adjustment (COLA), which is one of the smallest annual increases in the program’s history. Since 1975, only seven COLAs have been less than 2 percent. Four of these seven COLAs have occurred in the past five years. The 2013 COLA was 1.7 percent.
Well, some would say that a 1.7 percent COLA is paltry. Others would argue that it is folly for a nation of 317,336,357 with a debt of $17,233,262,277,524 ($54,305 per citizen) to pay a COLA.
Now, let’s get into the weeds a bit with the question: How does Social Security measure COLAs? It refers to the federal government’s Consumer Price Index, specifically the CPI-W, which tracks how inflation affects urban wage earners and clerical workers. Social Security looks at the CPI-W from July to September of the present year to figure the Social Security COLA for next year, so the 2014 COLA reflects the very tame inflation measured in the summer of 2013.
Another question is: Does the CPI-W accurately measure real inflation? Many people and groups say it doesn’t. The Senior Citizens’ League, a non-profit that lobbies for elders and retired veterans, contends that Social Security recipients have lost 34 percent of their purchasing power since 2000 because the CPI-W doesn’t track rising health care expenses correctly. I guess they haven’t been to a supermarket either.
On its website, the Bureau of Labor Statistics (BLS) confesses that the CPI “differs in important ways from a complete cost-of-living measure.” The CPI measures increases or decreases in rents, transportation costs, tuition, food, clothing, prescription drug and medical care costs and the prices of consumer discretionary goods and services – 200 item categories in all. Still, some prices in the CPI rise faster than others; medical costs increased 2.4 percent from September 2012 to September 2013, and housing costs rose 2.3 percent.
Interestingly, the government agency that calculates inflation, the Bureau of Labor Statistics, also calculates the unemployment rate. The BLS received heavy criticism from Forbes magazine, the New York Post and other media heavyweights regarding the sudden drop in unemployment figures just prior to the 2012 presidential election.
This reminds me of the 1960s show, “Who Do You Trust?” emceed by Johnny Carson and announced by Ed McMahon (before they did the Tonight Show) where Carson would interview some strange people, and then ask them some silly questions.The questions were worth $25, $50 and a whopping $75.
Social Security’s maximum monthly benefit will be increasing. In 2013, a Social Security recipient who had reached full retirement age could claim a maximum monthly benefit of $2,533. In 2014, the limit will increase to $2,642.
Now to the Social Security’s annual earnings limit. This limit is only faced by Social Security recipients who have yet to reach the month in which they turn 66. In 2013, retirees younger than 66 were able to earn up to $15,120 before having $1 in retirement benefits temporarily withheld for every $2 above that level. In 2014, the annual earnings limit rises to $15,480. Social Security recipients who will turn 66 next year can earn up to $41,400 in 2014; if their earnings break through that ceiling, they will have $1 of their benefits temporarily withheld for every $3 above that level.
Once you get to the month in which you celebrate your 66th birthday, you can earn any amount of income thereafter without a withholding penalty!
Lastly, the wage base for Social Security taxes is rising. The 2013 payroll tax cap was set at $113,700. Workers will pay a 6.2 percent payroll tax on the initial $117,000 of their income in 2014. About 6 percent of working Americans will pay more in Social Security tax next year as a consequence of this seemingly insignificant adjustment.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.
The content was featured in Randy's column in The Ridgewood News on January 24. Click here: Neumann: What’s new in Social Security in 2014