Updates on Social Security | Tax Tip of the Week | No. 196

Seven New Social Security Rules for 2013

Payroll tax cut ended.  As you probably noticed by now, your payroll check is less than last year.   This is because the payroll tax cut expired at the end of 2012.  In 2011 and 2012 you paid 4.2% of your income into Social Security.  Starting in 2013, the Social Security tax rate has returned to 6.2%.Higher payroll tax cap.  The payroll tax cap increased by $3,600 for 2013.  This means you will now pay Social Security taxes on $113,700 of your income, up from $110,100 in 2012.  As always, there is no maximum earnings limit on the 1.45% (2.9% if self-employed) Medicare tax.More online services.  A trip to the Social Security office is no longer necessary to start your Social Security payments.  A growing number of retirees are now claiming benefit payments online.  For the first time in 2012, you could access your Social Security statements online, including your complete earnings history and expected payments.  In early 2013, Social Security added online services including the ability to access a benefit verification letter and payment history.Reduced office hours.  Social Security offices are reducing the hours they are open to the public to save money and avoid paying overtime to their workers.  Social Security offices nationwide began closing offices 30 minutes early each day starting on November 19, 2012.  Offices will also be closed at noon every Wednesday.Paper checks will end.  On March 1, 2013 the Treasury department stopped mailing paper checks to Social Security recipients.  The preferred method for retirees to receive benefits is to have the funds directly deposited in their bank or credit union checking accounts.  For those recipients without bank accounts, the funds will be deposited onto a prepaid Direct Express Debit MasterCard.  Note that over 93% of Social Security and Supplemental Security Income (SSI) recipients have already signed up for direct deposit.Higher earnings limit.  You have the option of receiving Social Security benefits at age 62.  If you continue to work between the ages of 62 and 66 and receive Social Security benefits you might have part or all of those benefits temporarily withheld.   Workers between the ages of 62 and 66 can earn up to $15,200 in 2013, after which $1 in benefits will be withheld for every $2 of income above the earnings limit.  People who turn 66 this year can earn up to $40,080, and then $1 of benefits will be withheld for every $3 earned above the limit.  Earnings after the month you turn 66 are not subject to any earning limits.  Benefits may be recalculated at age 66 to reflect any previously withheld benefits and continued earnings.Bigger Payments.  Social Security beneficiaries received a 1.7% increase in benefits in 2013 due to the increased cost-of-living index.  Beginning in January 2013, the average Social Security benefit increased from $1,240 to $1,261/month.  The maximum Social Security benefit for someone turning 66 (and receives benefits for the first time) in 2013 is $2,533/month.  The actual amount depends on a formula that considers your lifetime earnings.

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Rick Prewitt - the guy behind TTW...until next week.