Since the consumer price index did not appreciably increase this past year, the Social Security and Supplemental Security Income benefits for more than 57 million Americans did not automatically increase in 2010. This is the first year without an automatic Cost-of-Living Adjustment (COLA) since this COLA provision became effective in 1975.
The percentage of the Social Security tax that will be deducted from a worker’s pay in 2010 will remain at 6.2 percent of earnings. The maximum amount of wages on which this tax will be imposed for the year 2010 will remain at $106,800. This is the same maximum amount of taxable earnings as the year 2009. The percentage of Social Security tax and the maximum amount of earnings on which this tax is imposed may increase each year. A Medicare tax is also deducted from a worker’s paycheck. Presently, this is an additional 1.45 percent of earnings. There is no maximum amount of earnings on which the Medicare tax is imposed.
The maximum amount that a worker under age 66 can earn without a reduction in Social Security benefits in the year 2010 remains at $14,600. For every $2 earned over this limit, $1 is withheld from Social Security benefits of a retiree who is under age 66. However, during the calendar year in which a worker attains age 66, the amount that can be earned prior to his or her birth month without a reduction in Social Security benefits in the year 2010 is $37,680. Thereafter, there is a $1 reduction in Social Security benefits for every $3 earned in excess of $37,680 earned in 2010 before attaining age 66 in this year. Only wages and net self-employment income count toward the Social Security earnings limit. Income from savings, investments, interest, pensions, annuities, capital gains or insurance will not affect a retired worker’s benefits. Failure to inform the Social Security Administration of any excess earnings by April 15th of the year following the excess earnings may result in the imposition of an additional penalty. A person can earn an unlimited amount of income without any penalty after attaining age 66.

Regular Retirement

A wage earner today may take normal retirement and begin receiving monthly Social Security checks at age 66 if born in 1944 (see chart on Page 4). At least 40 quarters of credit for contributing to Social Security (ten years of work) are needed to qualify for Social Security benefits. The amount of earnings upon which Social Security is paid in order to earn a quarter of coverage from wages or net income in the year 2010 is $1,120. A credit is earned by reporting at least $1,120 in 2010 of wages or net income from self-employment at any time in a year. Thus, a worker can receive credit for four quarters in a year by earning the $4,480 ($1,120 x 4 = $4,480) at any time during a year. This minimum amount of earnings for credit for a quarter of coverage increases each year.

Early Retirement

A person may elect to start receiving Social Security benefits as early as age 62 but at a reduced rate. Since the minimum retirement age remains at 62 but the regular retirement age has increased, a person electing early retirement must understand there will be a reduced monthly benefit. For example, a person who has a full retirement age of 66 and retires at age 62 will have his or her benefit reduced 5/9 of 1 percent for each of the 36 months between age 63 and age 66 plus 5/12 of 1 percent for each month in excess of 12 months before normal retirement age. Thus, if this person whose normal retirement would have been 66 retires early at 62, he or she will only receive 75 percent of his or her full retirement benefit. The disadvantage to taking early retirement is that it will permanently reduce a worker’s monthly benefit. In addition, a surviving spouse may receive less social security benefits for the rest of his or her lifetime. This is because the survivor can receive his or her own benefit or the deceased spouse’s benefit, whichever is more. If the deceased spouse had a larger benefit than the surviving spouse, the surviving spouse will be limited to his or her smaller benefit or the reduced benefit paid the worker who took early retirement.

Late Retirement

A worker may find it advantageous in two ways to delay normal retirement. First, the extra income earned after full retirement age usually increases a Social Security recipient’s average earnings because the later year’s earnings may be higher and will replace a previous lower year of earnings. The higher the earnings, the higher the monthly Social Security benefits will be. Secondly, a special credit is given to a worker who delays retirement. This credit is a percentage added on to the worker’s Social Security benefit that varies depending on his or her full retirement age.
A delayed retirement credit is given for retirement after the normal retirement age. To receive full credit, a person must be working at his or her normal retirement age. No additional credit is presently given after age 69. The following table shows the delayed retirement credit by year of birth:

Delay Retirement Credit
Year of Birth	Credit Per Year
1937-38	6.5%
1930-40	7.0%
1941-42	7.5%
1943 and later	8.0%

A person born in 1944 who intends to retire at age 70 would first determine his or her normal retirement age. This person’s normal retirement age is 66. The delayed retirement percentage for a person born in 1944 which is 8% would be multiplied by 4 for the additional years worked beyond normal retirement. Thus, the worker’s benefit at age 70 would be 32% higher than his or her primary insurance amount at age 66.

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