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Today’s question comes from Rose:
“I have been on Social Security for years with no other retirement pension. More than five years ago, I found I had to return to work in order to financially survive at the age of 69. I work for a nonprofit art museum, but Social Security taxes still are being withdrawn.
Will I ever get a raise in my Social Security check while I am able to enjoy it?”
No escape from Uncle Sam
Rose, I am sorry to report that as long as you continue working, you will never escape paying Social Security taxes. As you have observed, you will continue paying Social Security taxes even when you are receiving retirement benefits.
On the other hand, you can expect to receive increases in your retirement benefits. Every year, benefits are increased based on the cost-of-living adjustment (COLA) for the year ending in September.
Some years, retirees see no rise in benefits. For example, because inflation was low at the time, there was no adjustment for 2016. However, there was some good news this year: The increase for 2019 was 2.8%, the largest boost since the one for 2012.
The COLA for 2020 will be announced this fall.
Social Security sends you a statement each year that shows this adjustment. The statement also describes any deductions in your check for items such as Medicare and tax withholding.
Medicare premiums also always go up each year. For 2019, the premium for most people for Medicare Part B (which covers medical services and supplies, while Part A covers hospital services) went up from $134 to $135.50. (High-income retirees pay a higher premium for Medicare.) Tax withholding is optional, but is a good way to set aside money so that you are not hit with a big tax bill when taxes are due.
The reward for working later in life
Since you have returned to work, there is another factor that could increase your benefits: Retirement benefits are based on your highest 35 years of earnings, adjusted for inflation. If your salary now is higher than your earnings in any one of these previous 35 years or you did not previously work for 35 years, your benefits will reflect a recalculation and will be adjusted upward.
If you wish to check on your earnings history, set up an account at My Social Security. In addition to lots of other information, you will find a table there with your earnings history. The numbers in this table have not been adjusted for inflation, so they are not the actual numbers used in the calculation of your benefits.
For example, when calculating a taxpayer’s benefits, Social Security would multiply wages earned in 1980 by 4.02. So if that person earned $8,000 in 1980, his or her wages today would have to exceed $32,160 before today’s wages would replace the wages in 1980 in the benefit calculation.
Multipliers for other years can be found at the Social Security Administration website. Thirty-five years is a pretty long earnings history, so there may well be a year when today’s earnings are greater than a year in the past. That means your Social Security check may well go up — although perhaps only a little — in time for you to enjoy it.
If you have additional questions about your Social Security payout and how it could impact retirement, you might want to consider getting some inexpensive professional help.
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The questions I’m likeliest to answer are those that will interest other readers. So, it’s better not to ask for super-specific advice that applies only to you.
I hold a doctorate in economics from the University of Wisconsin and taught economics at the University of Delaware for many years. In 2009, I co-founded SocialSecurityChoices.com, an internet company that provides advice on Social Security claiming decisions. You can learn more about that by clicking here.
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Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.