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Your Social Security Mailbox questions answered

Social Security changes in 2014 impact cost-of-living adjustments, maximum benefit payments and more. — Adam Voorhes

En español | Q: Will people who receive Social Security benefits get a cost-of-living increase in 2014? If so, how much, and who will get it?

A: In January, benefits will rise by 1.5 percent for the more than 57 million Social Security recipients. The higher payments also will go to more than 8 million people who get benefits under the SSI (Supplemental Security Income) program.

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If you're already on Social Security, the number of extra dollars you'll get will depend on the level of your 2013 benefits. But on average, monthly retirement payments will rise from $1,275 to $1,294, an increase of $19, Social Security says. Disabled workers will receive an average of $17 more a month, while the average widowed mother with two children will see her benefits grow by $39 a month.

The COLA for 2014 is based on the increase in the consumer price index (CPI) from the third quarter of 2012 through the third quarter of 2013.

Cost-of-living adjustments, or COLAs, are intended to ensure that Social Security payments aren't eroded by inflation. Over the last 25 years, COLAs have averaged 2.74 percent.

Q: What will be the maximum amount of my pay that can be taxed for Social Security in 2014?

A: The figure will be $117,000 — up from $113,700 in 2013. The new number is based on the national increase in average wages. The Social Security tax rate is 12.4 percent of pay, with 6.2 percent paid by the worker and 6.2 percent paid by the employer. Thus, a worker who earns $117,000 in 2014 will pay $7,254 in Social Security taxes — or about $205 more than in 2013.

In addition, employees and employers each pay a 1.45 percent tax for Medicare. But there's no cap — if an employee earns more than $117,000 in 2014, the Medicare tax will continue on the rest of the yearly salary.

In 2013, an additional Medicare tax of 0.9 percent was added by the Affordable Care Act (ACA) for individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly).

Q: Will Social Security change its annual earnings limit in 2014 and who will be affected?

A: The earnings limit will go up from $15,120 in 2013 to $15,480 in 2014, an increase of $360. The limit applies if you're between age 62 and full retirement age, currently age 66, get Social Security benefits and continue to work.

Community: How Have Social Security Changes in 2014 Impacted You? Join the Discussion.

There are two stages in how this works. In stage one, which applies from when you turn 62 until the start of the year in which you reach full retirement age, Social Security will withhold $1 in benefits for every $2 you earn over the $15,480 limit. Then, in the year when you reach full retirement age, a new earnings limit of $41,400 kicks in and $1 in benefits will be withheld for every $3 earned above that limit. However, Social Security only counts earnings in the months before you reach full retirement age. After that, the earnings test goes away and you can earn as much as desired.

And after you reach full retirement age, Social Security will recalculate your benefits to give you credit for any benefits that were withheld because of the earning limits. Usually, that results in a higher monthly payment.

Q: What other changes to Social Security are taking place in 2014?

A: Too many to name, but here are some significant ones:

  • For workers retiring at full retirement age, the maximum Social Security payment will increase from $2,533 a month to $2,642 a month. To receive that sum, however, you will have to have met or exceeded the maximum taxable earnings level for 35 years of your working life.
  • SSI payments will rise from $710 to $721 a month for individuals and from $1,066 to $1,082 a month for couples.
  • Faced with 10,000 retirements a day, Social Security is steadily moving many of its services to the Social Security website. Beginning in February 2014, the agency will no longer provide certain documents in its offices, including benefit verification letters and proof of Social Security numbers. However, that information will be available to people who set up personal "my Social Security" accounts online or who call Social Security at 800-772-1213. Go online to create an account.

See also: Are my Social Security benefits taxable?

This helpful calendar shows when you'll receive your benefits in 2014.

Stan Hinden, a former columnist for the Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question? Check out the Social Security Mailbox archive. If you don't find your answer there, send an email to the Social Security Mailbox.

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