Every year, about this time, we start looking to the coming year, and what changes will be coming for our finances. Many aspects of our finances are affected by the changes put into place each year. The IRS announces tax brackets, we learn about new contribution limits on tax-advantaged retirement accounts, and we find out about other benefits, including Social Security.
The coming year, 2013, promises to be interesting on a number of levels. Changes are coming in health care as some of the provisions of the Patient Protection and Affordable Care Act come into play, and as contribution limits — including those on IRAs for the first time in a few years — head higher. There are also quite a few changes coming to Social Security in 2013.
Here are some of the items that you can expect to be different, starting next year:
1. Payroll Tax Cut Means Higher FICA/Social Security Taxes
You probably don’t realize it, but you have been enjoying a tax break. For the last couple of years, there has been a payroll tax cut in place. Instead of paying 6.2% in FICA/Social Security taxes with your paycheck, you have been paying 4.2%. That is money that has been in your paycheck, but won’t be, starting in 2013. (Unless Congress does something about it, of course.)2. Cost of Living Increase
An announcement of a cost of living increase, amounting to 1.7% has been made. The Social Security Administration makes these adjustments when it feels as though inflation is having an impact. On average, a Social Security check is expected to increase by $21 in 2013.3. No More Paper Checks
Our society is moving toward a greater integration of technology when it comes to money. The government is on board as well, eliminating paper checks along with the rest of us. Starting on March 1, 2013, the U.S. Treasury will no longer mail checks. You need to arrange for direct deposit to your bank account, or you need to get a Direct Express Debit MasterCard. If you haven’t chosen an option by March, you will receive a pre-paid debit card.4. Increased Amount of Income Subject to Tax
High earners don’t see their entire income subject to Social Security taxes. Instead, you are only taxed on a certain amount of your earnings. In 2012, earners only paid Social Security taxes on the first $110,100 of income. In 2013, that amount goes up to $113,700. That means that you will pay more in taxes, since a greater portion of your income will be taxed.5. Higher Earnings Limit
One of the complications associated with receiving Social Security benefits goes along with working while collecting benefits. You are limited as to how much you can earn before you start seeing some of that money withheld from your Social Security payments. For 2013, you can earn up to $15,210 when you are under your full retirement age without penalty.6. Bigger Maximum Possible Benefit
The longer you wait to collect Social Security, the better your monthly benefit. If you wait until your “full retirement age,” rather than collecting as soon as the government will let you, you can see a better benefit. For 2013, that maximum possible benefit increases to $2,533.In many cases, these changes are relatively small. However, they add up over time. Be aware of the changes coming to Social Security and make your own adjustments to deal with them.
source: bargaineering.com
