Social Security and You: COLA increase flows in January
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Social Security and You: COLA increase flows in January

Because I write a weekly column and because it usually takes one or two weeks to compose, edit and get it distributed to newspapers around the country, it’s almost impossible for me to give my readers any real “news” about Social Security. And this was demonstrated once again recently when the Social Security Administration announced the cost-of-living-adjustment, or COLA, for 2015 Social Security checks.

In case you were in an Ebola quarantine unit and missed it, monthly benefits will go up 1.7 percent beginning with the Social Security checks in January. That’s now “old news.” But there are other increases tied into the annual COLA adjustment that didn’t make most news stories. I’ll share them here.

But first, I must get something else out of the way. Every single time I mention the annual cost of living increase in this column, I am flooded with emails from readers complaining that it is not enough.

I have explained countless times in this space how the COLA is computed. But it does no good. People still gripe that they should get more money. So this time, rather than use up half this column explaining a process people don’t want to believe anyway, I am going to refer you to the source. If you want to know how the annual Social Security cost of living adjustment is figured, go to www.socialsecurity.gov/cola.

And here is an interesting tidbit about Social Security COLAs that demonstrates the power of the senior citizen lobby in this country and how politicians will bend over backwards to court their votes. The first increase for 2015 will be paid in January.

On the surface, that may seem to make sense. But, remember: Social Security benefits are always paid one month in arrears. In other words, the check that comes in January 2015 is actually the payment for December 2014. So why do folks start getting their 2015 COLA increase in their December 2014 Social Security check?

Well, you have to go back about 20 years or so. At that time, COLA increases were effective with the month they were due. Had that old law never been changed, people would have been scheduled to get their next COLA increase in their January checks, which would be paid in February 2015. But a couple decades ago, seniors got all in a huff about this. They mistakenly thought they were being cheated out of one month’s COLA because they didn’t get their first increase until February. Rather than simply explain the logistics of the one-month delay in benefits, Congress knuckled under and said that, henceforth, COLA increases would be effective with the December payment of the prior year (payable in January of the next).

In addition to increases in monthly benefits, there are other changes to Social Security that are important to many people.

Let’s start with people still working and paying Social Security taxes. If you’re fortunate enough to be making a six-figure salary, you will be paying slightly higher taxes in 2015. The Social Security taxable earnings base is going up from $117,000 to $118,500. So people making that kind of money will be pumping a few more nickels into Social Security coffers next year.

One other annual change affects only people trying to get the necessary credits they need to qualify for Social Security in the first place. Most people who are working earn four credits per year. In 2014, you earned those four credits once you made $4,800. In 2015, you won’t get those credits until you make $4,880. (You actually will get one Social Security credit for each $1,220 you earn in 2015. But no one can earn more than four credits per year.) To qualify for retirement benefits, you generally need 40 credits. Fewer credits may be needed to get Social Security disability payments, or for your family members to get survivor benefits if you die.

Another annual increase impacts people who are getting Social Security checks but are still working. If you are under 66 years old, there is a limit to how much money you can make each year before your Social Security benefits are reduced. In 2015, you will be able to make $15,720 per year before seeing any reductions. That’s an increase of only $240 above the 2014 limits. For each two dollars you earn above the $15,720 limit in 2015, one dollar must be withheld from your Social Security checks.

There is a higher limit for working retirees in the year they turn 66. If you will reach age 66 in 2015, you can make up to $41,880, with no reduction in benefits, from January up to the month of your 66th birthday. Once you reach age 66, there is no limit on the amount of money you can make while getting Social Security checks.

People getting Social Security disability benefits get the same 1.7 percent increase as retirees. And there is one other minor change that might impact them. Disability benefits are paid to anyone who is unable to work at a substantial level. This year, the law defines that level as a job paying at least $1,070 per month. In 2015, that threshold goes up to $1,090. In other words, if you get disability benefits and are trying to work, you can make up to $1,090 per month next year and will still generally be eligible for your disability payments.

Another COLA increase impacts folks getting Supplemental Security Income, or SSI payments. The standard federal SSI payment amount will go up in 2015, from $721 per month to $733.

About half the states add money to the basic federal payment. Some of those states pass along the increase in their state supplement, but some don’t. So depending on where you live, your monthly SSI check may or may not go up.

SSI is a federal welfare program managed by the Social Security Administration. It makes monthly payments to low-income seniors and disabled people. As I constantly try to remind my readers, SSI is NOT a Social Security benefit, and SSI payments are not funded out of Social Security taxes.

If you have a Social Security question, Tom Margenau has the answer. Contact him at thomas.margenau@comcast.net

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