Tuesday, October 16, 2012

Social Security COLA 1.7% for 2013

Beginning with benefits in January 2013 Social Security benefit checks will go up 1.7%. The annual Cost of Living Adjustment (COLA) is based on the Consumer Price Index from the 3rd quarter. Neither Congress nor the President decides how much or whether Social Security benefits increase to keep pace with inflation.

The maximum earnings that are subject to Social Security tax will also increase in 2013 from $110,100 to $113,700. That means that Social Security tax is withheld for every dollar earned by a worker during the year until the worker reaches $113,700. All earnings above that have no Social Security taxes imposed on them.

The retirement earnings test exemption amount will also increase in 2013. The earnings limit for workers who are younger than "full" retirement age (age 66 for people born in 1943 through 1954) will be $15,120. Social Security deducts $1 from benefits for each $2 earned over $15,120. The earnings limit for people turning 66 in 2013 will be $40,080. Social Security deducts $1 from benefits for each $3 earned over $40,080 until the month the worker turns age 66. There is no limit on earnings for workers who are "full" retirement age or older for the entire year.

Medicare will likely increase the Part B premium for 2013, as well. That has not yet been determined. If it does, some Social Security beneficiaries who pay Medicare Part B premiums may actually not see any increase in their monthly benefits take-home amount, since the increase in Part B premium might offset the COLA increase.

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