Monday, December 10, 2007

SSA mailes out COLA notices, states earnings limits

It appears that Social Security recipients get a 2.33% COLA raise in 2008, starting with the January check, based on the mailing that I got last week.

The earnings limit for 2007 for someone under full retirement age for the entire year of 2007 is $12,960. If you reached full retirement age in 2007, which slides upward, the limit is $34,400. The corresponding amounts in 2008 will be $13560 and $36120. As covered before, this normally comprises only pay for work (wages, tips, most royalties), not investments, 401K withdrawals or pensions. (An important justification reference is this.

The SSA, on its mailed notification of the COLA increase, writes “We paid you benefits in 2007 based on the amount of money you estimated you would make. When your employer(s) reports your actual earnings for 2007 to us, we will adjust your benefits, if necessary. The earnings your employer reports are the amount that will be on the W-2(s) you will receive. If the earnings on your W-2(s) for 2007 include money you earned in another year, you should contact is before April 15 (2008) to let us know. We will also ask you to estimate your earnings in 2008, so we can pay you correctly.”

It does not appear that one needs to volunteer an earnings estimate unless one will go over. I covered this on March 27 on this blog. The SSA does not insist on doing federal withholding, but up to 85% if the payment can be taxable, depending on the total when other income is added.

I still wonder why bureaucratic waste over the earnings limit is necessary. If you paid into the system, why shouldn’t you be able to chose when to take it out, with just a lower amount based on actuarial life expectancy?

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