The Social Security program is undergoing some changes in 2011 that will affect just about everyone – current retirees, those retiring soon and American workers. Here’s what you need to know about these changes, from a recent U.S. News Money report:
For 2011 only, Social Security taxes will drop from 6.2 percent to 4.2 percent for those with taxable wages of less than $106,800 per year. For the self-employed, the tax rate drops from 12.4 percent to 10.4 percent in 2012.
Paper checks stop after May 1, 2011. Anyone applying for Social Security benefits after May 1, 2011 will no longer have the option to receive paper checks – you will be able to choose either direct deposit into a bank or credit union account, or have your monthly benefits loaded onto a prepaid Direct Express Debit MasterCard. For those retirees who already receive their benefits via a paper check, that service will stop on March 1, 2013 and you will be able to choose between direct deposit or debit card. This is estimated to save the system over $1 billion in the next ten years.
No more retroactive benefit suspensions. Beginning this year, retirees will no longer be able to retroactively suspend benefits and pay back monies already received to receive higher payments going forward. You will still be able to temporarily suspend benefits and restart them later – however, you will only be allowed to suspend benefits for the months you did not receive a payment or for future benefits beginning with the month in which you made the request.
Free loan option discontinued. Starting in 2011, individuals are no longer allowed to apply for benefits at age 62, pay back those benefits at age 70 and then reclaim benefits at a higher rate due to delayed claiming. The new rules are that you can only withdraw an application for benefits within 12 months of your first payment, and you are allowed only one withdrawal per lifetime.
For more information on effective retirement and estate planning, contact our Ross Estate Planning estate planning attorney.