What Does a Social Security Raise Mean to You?

You may have heard that the Social Security Administration recently announced a 3.6% cost of living increase for Social Security recipients starting in 2012. This is good news for those receiving Social Security benefits, as the last increase came two years ago (5.8% in 2009).  If you are not yet drawing Social Security, you may be wondering what this raise means for you. 

While a PhD in Social Security benefits might be needed to calculate how, a fact that is less known is that those aged 62 or older who are not receiving benefits just yet also receive benefit of the 3.6% increase.  Essentially, Social Security benefits before age 60 are based on wage increases, but at age 62 they are based on price increases, i.e. the 3.6% cost of living adjustment. 

Other Social Security related changes courtesy of Horsesmouth.com include:

  • The maximum taxable wage base rises to $110,100 in 2012, up from $106,800 in 2011.  This means that you do not pay Social Security tax on any wages over $110,100 next year.
  • The earnings test before full retirement age rises to $14,640 in 2012, up from $14,160 in 2011.  If you are drawing Social Security before your full retirement age, you can earn $14,640 next year before your Social Security benefits will be reduced.
  • The maximum Social Security benefit for a maximum earner retiring in 2012 will be $2,513/month, up from 2,366/month in 2011.

The bottom line is that Social Security benefits can have a meaningful impact during retirement and it is important to maximize those benefits to the extent possible.  Careful analysis based on your particular situation is therefore critical to your financial health.  Consult your financial advisor about maximizing your Social Security benefits.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.