When is Social Security COLA announced?
We determined a 1.3-percent COLA on October 13, 2020. We will announce the next COLA in October 2021. ssa.govCost-Of-Living Adjustment (COLA)
17 September, 2021 - 07:41am
When you hit your 60s, it’s time for you and Social Security to come to a reckoning.
After all, it’s likely you have been paying into Social Security for decades, and now you have a choice to make: Claim your benefit early, claim it right on schedule, or postpone claiming it.
Unfortunately, no perfect answer exists to make this easy. What’s best for your neighbor may be different from what’s best for your cousin, which in turn may be different for what’s best for you.
You can claim Social Security as early as age 62, but there’s a catch. The amount of your monthly checks will be reduced, and that reduction is for life. To qualify for your full benefit, you need to postpone claiming until your full retirement age, which for most people is between 66 and 67.
But there also is a benefit to waiting until you are 70, because you are rewarded with an even larger monthly check if you do.
As you ponder this momentous decision, here are five key points to keep in mind:
Would you like to continue to work even after you start drawing Social Security? You can, but be aware: There’s a limit to how much you can earn if you haven’t reached full retirement age. If you earn more than what’s allowed for the year, your benefit is reduced by $1 for every $2 you go over the maximum. This rule begins to ease up in the year when you reach full retirement age. During that year, the benefit is reduced by $1 for every $3 you earn over an increased maximum. Those earnings limits are adjusted for inflation each year, so make sure you are up to date. Once you finally reach full retirement age, you can work and earn all you want. There’s no limit.
Your Social Security benefit could be taxed if you continue to work or have other sources of income. Your entire benefit is never taxed, though; instead, taxes owed are based on a percentage of your total benefits. If you file federal taxes as an individual and your provisional income is between $25,000 and $34,000, you may have to pay income taxes on 50% of your Social Security benefit. If your income is more than $34,000, up to 85% of your benefit could be taxable. Married couples filing jointly may be taxed on 50% of their benefit if their income is between $32,000 and $44,000. They may be taxed on up to 85% of their benefit if their income is more than $44,000.
People are living longer, and that could play a role in when you decide to claim your Social Security benefit. Consider how healthy you are and how long you think you might live. If you anticipate living into your 80s or 90s and you have other sources of income to hold you over, you might want to delay taking Social Security until you are 70 to get the maximum benefit. That larger monthly check could be especially important if, over time, your retirement savings start to run out.
A pension could affect your Social Security benefit, depending on whether it’s a government pension or a private pension. This is because some federal employees and employees of state and local governments receive pensions based on earnings that they didn’t pay Social Security taxes on. Let’s say that, although you didn’t pay Social Security taxes with your government job, you are eligible for Social Security benefits because of another job where you did pay the tax. In that case, your benefit amount may be reduced, and the Windfall Elimination Provision will help determine how much your benefit actually is.
Here’s an added twist: If you are eligible for Social Security based on your spouse’s record, and you also have a pension not covered by Social Security, the Government Pension Offset determines whether your benefit on your spouse’s record will be affected.
Marital status is another factor that can affect when you take Social Security. For example, married people are eligible for benefits based on their spouse’s work history. This spousal benefit is 50% of the working spouse’s earned benefit, but for you to claim this the working spouse must be at least 62 and already have filed for benefits. If you are divorced, you may be eligible for spousal benefits based on your ex-spouse’s work history. Naturally, there are rules related to that: Your marriage must have lasted at least 10 years, you must be divorced for at least two years, and you must still be single. Also, you need to be at least 62 and not eligible for higher benefits based on your own work record. But unlike spousal benefits for married people, your ex-spouse does not need to have filed for benefits for you to claim them.
These are just a few factors to think about as you decide when to take Social Security benefits. The decision is a significant one, and getting it wrong could prove costly. Consider talking to a financial professional to help you navigate the often-confusing rules before making any decisions regarding when to start benefits.
You earned that Social Security benefit. You want to make sure you use it to your best advantage.
Founder, Comprehensive Advisor Financial & Insurance Services
Brett Gottlieb is the founder of Comprehensive Advisor Financial & Insurance Services in Carlsbad, Calif. As a financial adviser, he helps pre-retirees and retirees with income planning, investment portfolio management, tax planning, health care planning and legacy planning. Gottlieb has bachelor’s degrees in business administration and economics from California State University-Chico. He has passed the Series 65 securities exam and is an independently licensed life insurance agent.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
17 September, 2021 - 07:41am
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While many seniors rely heavily on Social Security to make ends meet, a large number of people have lost faith in the program. A good 73% of working Americans think Social Security won't be there for them in retirement, according to the 21st Annual Transamerica Retirement Survey. But those who think that way may be blowing the current situation out of proportion.
The Social Security Trustees recently released their long-awaited update on the state of the program's finances, and the news wasn't exactly wonderful. It also wasn't shocking.
It's not a secret that in the coming years, Social Security will owe more money in benefits than it collects in revenue as baby boomers exit the workforce in droves and too few replacement workers come in to make up for it. Social Security will, in that scenario, have to tap its trust funds to keep up with scheduled benefits. But once those trust funds run dry, benefit cuts will be on the table.
Before the coronavirus crisis began, the Social Security Trustees estimated that the program's trust funds would run out of money by 2035. Now they're saying that milestone will arrive a year sooner due to the widespread unemployment crisis the pandemic triggered. Once those trust funds are depleted, Social Security recipients could be looking at a 22% reduction to their benefits. That applies to current and future beneficiaries alike.
Interestingly, the aforementioned Transamerica survey was compiled and released before the Trustees put out their latest report. But if anything, the number of workers who now think Social Security won't be there for them in retirement could be higher.
Clearly, Social Security benefit cuts are not a desirable thing. But there's also a big difference between Social Security going broke and the program having to cut benefits. The former is not on the table, which means that current and future retirees will still get some amount of money on a monthly basis.
Furthermore, though benefit cuts are possible, they're not set in stone. Reducing benefits could put millions of seniors in a very precarious financial situation, so lawmakers are apt to try to figure out ways to avoid that scenario.
Of course, current retirees may have few options for compensating for Social Security benefit cuts. But if you're still working, you should be a bit less worried.
For one thing, you may have plenty of years ahead of you to boost your personal retirement savings so you're less reliant on Social Security during your senior years. You may also have the option to delay your filing, which could give you a larger monthly benefit for life.
While the latest news on the Social Security front may not be something to celebrate, fears about the program going away are completely pretty overblown. As long as we continue taxing workers' income for Social Security purposes, seniors will be able to collect benefits to some degree. And given the consequences of cutting benefits, lawmakers are pretty invested in finding solutions to prevent that from happening anytime soon.
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