Put Wife on Payroll?

Jan 12, 2023 /

In financial planning it is common to employ family members for various tax or other benefits. A child who has earned income can contribute to an IRA, for example. So a parent who owns a business may put the child on the payroll in order to make them eligible for IRA contributions.

In Social Security we often talk about putting the wife on the payroll in order to qualify her for Social Security benefits. (Excuse the stereotypical sexist language, but it usually is the husband who runs the business and the wife who has low or no earnings for Social Security.) There’s a whole analysis that goes into this: will paying the wife—and paying SE taxes on her earnings—qualify her for a benefit that is higher than the spousal benefit she would get as a nonworking spouse?

Read more ...

How Does Local Cost-of-Living Affect Retirement?

Dec 29, 2022 /

Across the country, workers with similar skills earn different compensation to reflect the cost of housing in their local labor market. Yet, Social Security benefits are determined by a national formula that does not take local price levels into account. To the extent that living in an area with a high cost-of-living translates to higher wages, workers in these areas could end up with lower replacement rates than otherwise similar workers in less-expensive areas. If the difference is substantial, workers might respond by saving more, working longer, or retiring to a lower-cost location.

Read more ...

Post-Election Social Security Cuts Less Likely Now

Nov 14, 2022 /

Prior to the midterm elections, when it was looking like Republicans might take control of both the House and the Senate, attention was focused on comments by Senator Rick Scott (R-FL), Senator Ron Johnson (R-WI), and other influential Republicans who proposed subjecting Social Security and Medicare to a renewal vote every year or every five years in the hope of reducing spending on these now-mandatory government programs. Republicans floated a number of ideas, including raising the full retirement age to 70 and cutting benefits for higher-income retirees. But subjecting Social Security and Medicare to the annual budget process would be a major distortion in how these programs operate, subjecting them to the whims of whoever happens to be in power.

Read more ...

Social Security announces 8.7% COLA for 2023

Oct 13, 2022 /

The waiting is over. Benefit checks will be going up by 8.7% in January.

The CPI-W, which is the index used to calculate the COLA, rose by 8.5% over the last 12 months to an index level of 291.854 (1982–84 = 100). In calculating the COLA, SSA takes the average of the indexes for July, August, and September (291.901), subtracts the average for the same period last year (268.421) and calculates the percentage gain, which was 8.747%.

SSA made it clear in its press release that it will not be necessary to call SSA: beneficiaries will be notified by mail in early December what their new benefit amount will be. To get the information a bit faster, people can go to their Social Security account and sign up for email or text notifications. They will get an alert when their COLA announcement has been posted as a message to their account.

Read more ...

CR Gives SSA Half the Amount Requested

Sep 27, 2022 /

Congress is still in the process of hammering out a continuing resolution (CR) to keep the government running until lawmakers can agree on budget for FY 2023. As discussed in this newsletter, CR funding for any given agency usually matches the amount they got last year, unless an “anomaly” is granted. This year SSA asked for an anomaly of $800 milion over and above the $13 billion the agency received last year.

Read more ...

You Earned It, You Keep It

Sep 15, 2022 /

The latest proposal to be analyzed by SSA’s office of the chief actuary is Angie Craig’s (D-MN) “You Earned It, You Keep It” proposal (H.R. 8717).

Under this bill, starting in 2023 Social Security benefits would no longer be taxed. (Hence the name, “you earned it, you keep it.”) To make up for the lost revenue, transfers from the general fund of the U.S. Treasury would be made to the OASI, DI, and HI trust funds. In addition, payroll taxes—the 6.2% of wages each paid by the employee and employer—would be assessed on earnings over $250,000. This would leave a “donut hole” between the maximum taxable wage base, currently $147,000, and $250,000, of earnings that would not be taxed. Over time, as the average wage index rises, the maximum taxable wage base would eventually exceed $250,000 causing all earnings to be subject to payroll taxes.

Read more ...

House Democrats Call For Action on Social Security Reform

Aug 15, 2022 /

House Democrats John Larson of Connecticut and Pramila Jayapal of Washington teamed up on August 15 to wish Social Security a happy 87th birthday and urge action on a bill to expand Social Security. They are hoping that Larson’s bill, Social Security 2100: A Sacred Trust, will come up for a vote as soon as this fall.

Of the several proposals that have recently been submitted to the SSA Chief Actuary for analysis, the Larson bill is by no means the best one, since it extends solvency by only three years, to 2038, due to the sunsetting of several provisions which were designed to get Republicans on board. But Larson, as chairman of the House Ways and Means Social Security Subcommittee, has a lot of clout when it comes to Social Security legislation and would naturally call for action on his own proposal versus the proposals submitted by Bernie Sanders and Peter DeFazio, and others.

Read more ...

Most Voters Want Congress to Expand—Not Cut or Privatize—Social Security

Jul 13, 2022 /

Voters in the United States overwhelmingly support Democratic proposals to expand Social Security for all recipients to cover higher costs of living and oppose Republican proposals to completely end the federal program—established during the New Deal era to improve economic security for retirees, people with disabilities, and widows and widowers—before the end of the decade.

Read more ...

Sanders/DeFazio Bill Would Restore Solvency and Raise Benefits

Jun 22, 2022 /

Bernie Sanders and Peter DeFazio have introduced the Social Security Expansion Act, which would restore full solvency to the Social Security system by increasing revenues and raising benefits. Under the proposal, payroll taxes would be imposed on earnings over $250,000. A 12.4% tax would be assessed on investment and business income over $250,000 (couples) or $200,000 (individuals), and a 16.2% net investment income tax would be imposed on active S-corporation holders and active limited partners.

Read more ...

How Will High COLA Payouts Affect Social Security’s Finances?

May 27, 2022 /

The Social Security trustees are projecting an inflation rate of 2.4% under their 75-year, intermediate-cost scenario. According to the 2021 Trustees report (the 2022 edition is due out any day), the combined OASDI Trust Fund will run dry in 2034, after which ongoing revenues will be sufficient to pay about 78% of promised benefits.

With this year’s COLA bumping benefits up by 5.9% and next year’s COLA coming in as high as 7% or 8%, the question arises: will Social Security’s finances worsen as a result of these higher payouts?

Read more ...

Social Security Legislation Appears To Be Off the Table

May 12, 2022 /

A recent report has panned Congressman John Larson’s latest bill to reform Social Security saying it would extend the insolvency date by only four years and that if the provisions were made permanent instead of sunsetting in 2026 would actually move up insolvency by one year.

Read more ...

CMS Proposes New Rule Simplifying Medicare Enrollment

Apr 29, 2022 /

The Centers for Medicare and Medicaid Services (CMS) has proposed a rule doing away with unnecessary coverage delays following Medicare enrollment. Currently, if a person enrolls in Medicare during the last three months of their Initial Enrollment Period—that is, in one of the three months following their 65th birthday month—Medicare does not become effective until the second or third month after they sign up. If a person misses their initial or special enrollment period and signs up during their general enrollment period from January 1 to March 31, coverage does not start until the following July. Under the proposed rule, coverage in both cases would start the month after enrollment.

Read more ...

Social Security to Resume In-Person Services at Local Offices April 7

Apr 4, 2022 /

The Social Security Administration has announced the resumption of in-person services at local offices starting April 7.

To avoid waiting in line, they strongly encourage people to use their online services or to call and schedule appointments in advance rather than walking in without an appointment.

Offices tend to be the busiest first thing in the morning, early in the week, and during the early part of the month, so clients may want to plan to visit at other times.

Read more ...

Trust Fund Drawdown Begins

Mar 22, 2022 /

Most people have to wait until the annual Social Security Trustees Report is issued—sometime between May and August—to find out how the OASDI trust fund performed the prior year. But if you know where to look (and we do), you can find out as early as March.

If you go to Financial Data for a Selected Time Period and enter the time period you want—calendar year 2021 in this case—you can see how much the trust fund took in, how much it paid out, and the change in asset reserves at the end of the year compared to the start.

Read more ...

Bipartisan Retirement Bill Excludes Social Security

Mar 7, 2022 /

Legislation aimed at helping Americans save for retirement is very popular in Congress—as long as it doesn’t address the thorny issue of Social Security solvency.

A new bill that has broad bipartisan support and appears close to passing would expand on 2019 legislation designed to help more people save for retirement. The current bill would require most employers with 401(k)-type plans to automatically enroll employees unless they opt out, sweeten tax credits for startup firms that offer workplace savings plans, promote a benefit for low-income savers, increase catch-up contributions for people in their 60s, and loosen rules to allow more annuity options. It would also raise the RMD age from 72 to 75.

Read more ...

SSA Backlog Continues

Feb 4, 2022 /

Social Security field offices are scheduled to remain closed through the end of March. Meanwhile, mail is piling up and telephone wait times are excruciating. Between Covid disruptions and budget cuts, service at SSA has never been worse. Thankfully, SSA’s automated systems seem to be working, and clients who apply online for benefits are having no trouble. But widows, who must apply for survivor benefits in person, are facing delays, as are disability applicants and anyone else with an unusual question or request.

Read more ...

T3 Survey: Voting Is Open

Jan 19, 2022 /

This is your chance to tell the advisory community which software tools you like the best. Naturally we are hoping you’ll help make Horsesmouth’s Savvy Social Security Planning Calculators stand out in the Social Security category. In last year’s T3/Inside Information Advisor Software Survey we scored high, but this year should be even better as the very robust capabilities of our calculators become more well known.

Read more ...

Understanding CDC Life Expectancy Data

Jan 10, 2022 /

The CDC caused a bit of a stir in July 2021 when it announced that life expectancy in the U.S. declined by a year and a half in 2020, primarily due to the pandemic. This was the largest one-year decline since World War II, when life expectancy declined 2.9 years between 1942 and 1943.

According to the CDC, life expectancy at birth is now 77.3 years. At age 65 life expectancy is 17.4 years for men (to age 82.4) and 20.1 years for women (to age 85.1).

Read more ...

Who Will Have Unmet Long-Term Care Needs?

Dec 14, 2021 /

The Center for Retirement Research at Boston College just completed a three-part series on the needs and resources available for long-term care.

The first study examined the odds of a 65-year-old developing minimal, moderate, and severe needs, considering both the intensity and duration of the required care. The results show that roughly one-fifth of 65-year-olds never require long-term care and about one-quarter will have severe needs, with the rest falling somewhere in between.

Read more ...

Why the Big Jump in Medicare Premiums?

Nov 30, 2021 /

The Medicare Part B base premium will be going up by 14.5% to $170.10 in 2022. All of the IRMAAs will increase as well, however the income levels will be adjusted for inflation and will start at $91,000 for individuals and $182,000 for couples. The annual deductible will be going up by $30 to $233. Here’s the explanation according to CMS.

Read more ...