Secure Your Future
Social Security benefits set to rise
Nov 15, 2007 2:00 PM
About 50 million Americans will see a 2.3 percent rise in Social Security starting in January. This increase is the smallest in four years. The average beneficiary will get an extra $24 per month.
The Cost-of-Living-Adjustment (COLA) is based on a comparison of consumer prices this July to September with the same three-month period last year. Benefits have been tied to inflation since 1975.
The smaller-than-usual increase was due to the fact that energy costs moderated over the summer and some categories of goods such as clothing and electronics moderated as well. Advocates for the elderly said the small increase highlights the need to revamp the COLA to better reflect prices paid for goods used by retired people including the money they spend on health care.
Almost one-third of older Americans count on Social Security for all of their income and for almost two-thirds of recipients it counts for at least half of their income. Without the COLA, recipients’ incomes would be about 30 percent less.
Other important Social Security changes take place in January. Because of an increase in average wages, the maximum amount of earnings subject to FICA withholdings (contributions to pay for future Social Security) will be capped at $102,000. That’s up from $97,500 in 2007. This will increase the annual maximum paid next year by $279 to a total of $6,324. The maximum this year is $6,045.
Of the estimated 164 million workers who will pay into Social Security next year, more than 11 million will pay higher taxes as a result of this increase.
The contribution rate remains unchanged. The rate is 7.65 percent for both the employee and the employer until the cap is reached. After the cap is reached, both the employee and the employer continue to pay 1.45 percent (the rate for Medicare Part A on all earnings).
Full retirement age (FRA) in 2008 will be age 65 and 10 months. Baby boomers who reach age 62 will be eligible for reduced benefits.
A Social Security recipient younger than the FRA will have $1 in benefits withheld for every $2 in earnings above the 2008 limit of $13,560 per year ($1,130 per month).
In the calendar year, but not the month that an individual reaches full retirement age, $1 in benefits will be withheld for every $3 in earnings above $36,120 per year ($3,010 per month). Beginning in the month in which a person reaches FRA, there is no earnings limit. A person can earn any amount without having Social Security benefits reduced.
Medicare Part B
The standard Medicare Part B monthly premium will be $96.40 in 2008, up from $93.50 in 2007. This $2.90 increase is 3.1 percent, the smallest increase since 2001. This is the rate for a single taxpayer whose “modified adjusted gross income” (“magi”) is less than $82,000 and $164,000 for those filing a joint tax return.
About 5 percent of current Part B enrollees are expected to be subject to higher premium accounts. These higher monthly rates go up to $238.40 for an individual with a “magi” greater than $205,000 or a couple with a “magi” greater than $410,000.
UFT members get a refund of their Part B premiums from the city because of legislation championed by the UFT.
Some things are always true
In April 2002, columnist Cindy Adams interviewed Judge Judith Sheindlin — Judge Judy. Among other things, Sheindlin discussed her finances, saying that her income in a week as a TV judge is more than she earned in a year as a real judge. She then added, “But my best income is my monthly pension check. That nobody can take away. That keeps you from living homeless in a cardboard box under a bridge. To me that’s real security.”
Judge Judy spoke for all retirees who have a traditional pension plan like our Qualified Pension Plan.
Maximum TDA contributions for 2008
The IRS has just come out with the maximum amount members can contribute to their TDA plans for 2008. They are the same as for 2007. Members under age 50 can contribute $15,500; those 50 or older are allowed to add an extra $5,000.
Members with at least 15 years of service, who have contributed an average of $5,000 or less per year, may contribute up to an additional $3,000 a year in “catch-up” contributions, up to a total of an additional $15,000 over their lifetime. Your 2007 Annual Benefits Statement contained your 2008 current and maximum contribution rate for 2008. The rates listed are now finalized.
New regulations affect TDA participants
As a result of new regulations governing Section 403(b) — tax-deferred annuity programs — direct transfers of funds from the Teachers’ Retirement System TDA program to another Section 403(b) program are not available to TDA participants. On the advice of TRS’ outside tax counsel, in order to protect the favorable tax treatment of members’ accounts TRS has suspended all processing of direct transfers pending further clarification from the IRS.
Quarterly Account Statement
The TRS has begun to send the third- quarter QAS to 114,000 in-service members and members on a leave of absence for up to seven school years.
With the QAS, you will receive a reminder listing your current designated beneficiaries in order to review that your beneficiary designations are up to date. Life changes such as marriage, births, deaths or divorce should be considered and you should request the appropriate changes.
If you have no designated beneficiary on file, you will be warned of the dangers to your loved ones.
“Secure your future” is compiled and written by Mel Aaronson, Sandra March and Mona Romain, teacher-members of the NYC Teachers’ Retirement Board. For further information on items discussed, call your UFT borough office or the TRS. BRONX: 1-718-379-6200; BROOKLYN: 1-718-852-4900; MANHATTAN: 1-212-598-6800; QUEENS: 1-718-275-4400; STATEN ISLAND: 1-718-605-1400; Teachers’ Retirement System: 1-888-8NYC-TRS (692-877), www.trs.nyc.ny.us.
