Social Security

Think Twice Before Counting on a COLA

 
Think Twice Before Counting on a COLAThe rising costs of food, gas, electricity, and health care can strain anyone’s budget. The situation is even worse if your living expenses increase while your income stays the same, because your purchasing power will steadily decline over time. That’s why cost-of-living adjustments, or COLAs, are especially valuable to retirees and others living on fixed incomes.

 
A COLA is an increase in regular income you receive (such as a Social Security or pension benefit) that is meant to offset rising prices. It’s important protection because price inflation has occurred in most years during the last 40 years. However, a COLA may not be payable in years when inflation slows or declines.

 

How COLAs work

 
It’s easy to think of a COLA as a “raise,” but a COLA is meant to help you maintain your standard of living, not improve it. For example, let’s say you receive a $2,000 monthly retirement benefit, and the overall cost of the things you need to purchase increases by 3% during the year. The next year, you receive a 3% COLA, or an extra $60 a month, to help you manage rising prices.

 
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How can I protect my Social Security number from identity theft?

 
How can I protect my Social Security number from identity theft?Your Social Security number is one of your most important personal identifiers. If identity thieves obtain your Social Security number, they can access your bank account, file false tax returns, and wreak havoc on your credit report. Here are some steps you can take to help safeguard your number.
 

Never carry your card with you.

 
You should never carry your Social Security card with you unless it’s absolutely necessary. The same goes for other forms of identification that may display your Social Security number (e.g., Medicare card)
 
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I’ve recently changed my legal name. Do I need to change my name on my Social Security card?

 
I've recently changed my legal name. Do I need to change my name on my Social Security card?Whenever an individual legally changes his or her name, it is important to contact the Social Security Administration (SSA) as soon as possible. Failure to notify the SSA of a name change could prevent your wages from being posted correctly to your Social Security earnings record and might even result in a delay when you file your taxes.
 
To obtain a new card with your new name, you need to provide the SSA with a recently issued document that proves your identity and legal name change. Acceptable documents include:

  • Marriage certificate
  • Divorce decree
  • Certificate of Naturalization showing new name
  • Court order for approving the name change

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Taxes, Retirement, and Timing Social Security

 
Taxes, Retirement, and Timing Social SecurityThe advantages of tax deferral are often emphasized when it comes to saving for retirement. So it might seem like a good idea to hold off on taking taxable distributions from retirement plans for as long as possible. (Note: Required minimum distributions from non-Roth IRAs and qualified retirement plans must generally start at age 70½.) But sometimes it may make more sense to take taxable distributions from retirement plans in the early years of retirement while deferring the start of Social Security retirement benefits.
 

Some basics

 
Up to 50% of your Social Security benefits are taxable if your modified adjusted gross income (MAGI) plus one-half of your Social Security benefits falls within the following ranges: $32,000 to $44,000 for married filing jointly; and $25,000 to $34,000 for single, head of household, or married filing separately (if you’ve lived apart all year). Up to 85% of your Social Security benefits are taxable if your MAGI plus one-half of your Social Security benefits exceeds those ranges or if you are married filing separately and lived with your spouse at any time during the year. For this purpose, MAGI means adjusted gross income increased by certain items, such as tax-exempt interest, that are otherwise excluded or deducted from your income for regular income tax purposes.
 
Social Security retirement benefits are reduced if started prior to your full retirement age (FRA) and increased if started after your FRA (up to age 70). FRA ranges from 66 to 67, depending on your year of birth.
 
Distributions from non-Roth IRAs and qualified retirement plans are generally fully taxable unless nondeductible contributions have been made.
 
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