The Social Security Administration has announced several changes for 2013.
Here’s a quick list of the changes.
1. Bigger monthly payments. Social Security payments are adjusted each year to reflect inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. Social Security payments will increase by a cost of living adjustment of 1.7 percent in 2013. Although any increase is welcome, this is certainly less than the 3.6 percent increase for 2012. In recent years, the adjustment has been as little as 0 percent in 2010 and 2011, and as high as 14.3 percent in 1980. The average Social Security check for an individual is expected to increase by $21, reflecting a change from $1,240 in 2012 to $1,261 in 2013. Couples will see their benefits grow from an average of $2,014 in 2012 to $2,048 in 2013.
2. Increased Earnings limit. Social Security retirees who are less than full retirement age (age 66 for those born between 1943 and 1954), take early Social Security retirement, but continue to work are limited in the amount they may earn without a reduction in benefits. Early retirees may earn up to $15,120 in 2013, after which for every $2 earned over that amount, $1 will be reduced from their benefit. The number for 2012 was $14,640. For retirees attaining age 66 during 2013, the limit will be $40,080, after which benefits will be reduced by $1 for every $3 in excess of $40,080. Once a worker attains full retirement age, he or she may retire, collect full Social Security benefits, and earn any amount without penalty.
3. Higher Social Security tax cap. The maximum amount of earnings subject to Social Security taxes will be $113,700 in 2013, up from $110,100 in 2012. Some experts estimate as many as 10 million people will pay higher taxes as a result of the increase in the tax cap.
4. Payroll tax cut scheduled to expire. Ordinarily, workers pay Social Security taxes at the rate of 6.2 percent of earnings, but the Tax Act of 2012 temporarily reduced that rate to 4.2 percent. Currently, workers pay only 4.2 percent, but the temporary reduction expired Dec. 31, 2012; and in 2013, workers will go back to the full 6.2 percent rate.
5. Maximum possible benefit grows. The maximum possible Social Security benefit for a worker who begins collecting benefits at full retirement age will be $2,533 in 2013, up from $2,513 in 2012.
6. Paper checks will end. The US Treasury department will stop mailing paper checks to Social Security recipients March 1, 2013. All federal benefit recipients must then receive their payments by direct deposit to a bank or credit union account, or have it loaded onto a Direct Express Debit MasterCard. Recipients who do not choose an electronic payment option by March 1, 2013 will receive their benefits loaded onto a pre-paid debit card. Most recipients already receive their benefit payments electronically, and new Social Security recipients have been required to choose an electronic payment option since 2011.