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.
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.
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.