[Noozhawk’s note: One in a series of Social Security-related columns by AmeriFlex representatives. Click here for a related article.]
The Social Security wage base increased to $113,700 from $110,100. This threshold is the maximum amount on which a wage earners’ gross income will be taxed by Social Security. Any amount above this is not taxed by Social Security.
The Social Security tax rate paid by employees was reduced to 4.2 percent for 2011 and 2012. As of Jan. 1, 2013, the rate returned to 6.2 percent, ending the “payroll tax holiday.” The tax rate paid by employers has been and remains at 6.2 percent.
For self-employed workers, the thresholds also increased to $113,700 of net self-employment income, and the tax rate increased as well to 12.4 percent — all of which is paid by the self-employed wage earner.
The wages needed to earn one Social Security credit increased to $1,160 from $1,130. If you were born after 1929, 40 credits are needed to receive retirement benefits, and you can receive up to four credits per calendar.
The retirement earnings test amounts increased to $15,120 a year from $14,640 a year, meaning that for every $2 earned above this amount, $1 will be withheld for Social Security if you are collecting Social Security and are under your full retirement age.
The maximum benefit amount a person can receive in Social Security increased to $2,533 a month from $2,513 a month, which is determined by the number of years worked and the amount earned.
Readers: Email your Social Security questions to firstname.lastname@example.org.
— Justin Anderson, CFP, CRC, CLU, is a financial planner and Bibi Taylor, MBA, is the Social Security project coordinator at AmeriFlex, 3700 State St., Suite 310, in Santa Barbara. Call 805.898.0893 for more information. Financial advisors and registered representatives associated with AmeriFlex Financial Services offer securities and advisory services through SagePoint Financial Inc., member FINRA/SIPC. Insurance services offered through AmeriFlex Financial Services, which is not affiliated with SagePoint Financial Inc. or registered as a broker-dealer or investment advisor. Registered representatives may only discuss and/or transact securities business with residents of the following states: AR, AZ, CA, CO, FL, GA, IL, IN, MI, MO, NC, ND, NJ, NM, NV, NY, OH, OR, PA, PR, SC, TX, VA, WA, WI.