President Obama has publicly committed to providing all Americans with the ability to "retire with dignity." His efforts have brought about some change to Social Security, while others continue to be a work in progress. Here are the noteworthy things you should know about Social Security in 2011. (The government's Social Security program may not last forever - be prepared by setting up your own. See Create Your Own Social Security Fund.)
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1. No Cost of Living Increase
While your pocketbook may not feel any fatter this year, the consumer price index (CPI) indicates that prices have not substantially risen above those observed during the third quarter of 2008. And while there have been some indications of inflation in 2010, the Social Security Administration is required to make 2011 cost of living adjustment decisions (also called COLA) based on the changes in inflation between the third quarter of 2008 and the third quarter of 2010. By those figures, inflation remains low. It also brings some bad news for Social Security beneficiaries, as low inflation means the Social Security Administration (SSA) will waive COLA in 2011, for the second year running.
The big picture impact? The more than 58 million Americans who currently receive monthly Social Security and Supplemental Security Income (SSI) benefits won't see any increase in their checks this year.
2. The Check Is Not in the Mail
To compensate for the lack of COLA, part of President Obama's economic stimulus package pushed for a one-time $250 special payment check for each individual receiving Social Security benefits. But, the $14 billion effort was declined. As it stands currently, Social Security beneficiaries will not receive any special payment check in 2011. However, House Democrats committed to revisiting a push towards a similar measure following November elections, and President Obama has renewed his call for the extra $250 payment.
3. More Money, More Medicare Part B Payments
In 2011, your income level determines whether your Medicare Part B premium payments will change. For beneficiaries with an income of $85,000 or less ($170,000 or less for joint filers), and currently have the SSA withhold Part B premium payments, 2011 payment amounts remain unchanged. For those making more than the income amounts stated above, 2011 will bring a 4.4% increase in Part B premiums over 2010 amounts. Those who are new to SSA benefits, or do not have their premiums withheld from their benefits, are also subject to this increase. (You've been paying in for years - now it's time to find out what the system owes you. To learn more, read How Much Social Security Will You Get?)
4. No Change to Social Security Tax
The year 2011 brings some good Social Security tax news for those still in the workforce. No COLA means that the amount of Social Security tax earnings assessed on the first $106,800 of a person's wages will remain at their current levels. This means that the maximum Social Security tax that employers and employees will pay in 2011 is $6,621.60 each (a tax rate of 6.20%). Those who are self-employed pay the entire amount.
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5. Exempt Amounts Remain
Those who are not of "normal retirement age" (generally 65 or older, depending on birth year), are ineligible to receive Social Security benefits when income exceeds a certain amount. These exempt amounts generally increase annually with increases in the national wage index. The absence of a COLA for December 2010, means the exempt amounts in 2011 remain unchanged.
6. More Funds, Faster Results
Fiscal year 2011 will bring more funding to the SSA, specifically for efforts to increase efficiency and processing. An 8% funding increase ($930 million more dollars than the 2010 enacted level) has been dedicated to faster processing and reduced case backlogs. Additionally, $796 million (a 9% increase over the previous year), has been dedicated to Continuing Disability Reviews. The ultimate goal is to reduce the initial disability claims backlog below 1 million, and process more than 3 million claims each year. (Find out everything you need to know about this program and whether it will benefit you. Check out 10 Common Questions About Social Security.)
The Bottom Line
Whatever your age, income, health or political affiliation, Social Security is a current part of life that impacts us all. Staying aware of the changes and evolutions in this important government program will help you be better prepared in both your present and future financial planning efforts.
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