December 28, 2012
An integral part of our planning for clients is our continuous monitoring of new thresholds that affect retirement plan contributions, Social Security taxation and Medicare premiums. Listed below are the figures for 2013. There have been a few changes in pension plan contributions for the 2013 tax year due to cost of living adjustments (COLA) announced by the IRS. These changes are noted in bold.
2013 Retirement Plan Contributions
If you participate in any of the above plans, and can maximize your contributions, we recommend that you visit with your Benefits Department and take advantage of these tax-deferred savings.
Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2011 through the third quarter of 2012, there will be a 1.7% cost-of-living adjustment beginning January, 2013. At the present time, the age at which one can collect full benefits (FRA – Full Retirement Age) has gone up and may continue to do so in the coming years. For those born in 1941, full retirement is age 65 years and 8 months; for those born in 1942, it is 65 years and 10 months. For those born between 1943 and 1954, full retirement age is 66. For those born in years 1955 to 1959 the basic retirement age is 66 plus additional months, contingent on your birth year. Full retirement age will gradually increase to 67 for those born in 1960 and later.
Please note: If you decide to delay the receipt of your Social Security benefits until after age 65, you should still apply for Medicare benefits three months prior your 65th birthday. If you wait, you may pay more for your Medicare Part B (medical insurance) and Medicare Part D (prescription drug) coverage.
The Social Security Administration has raised the wage base (or the amount of income against which Social Security withholding tax is applied) to $113,700, up from $110,100 in 2012.
Retirement earnings tests are imposed on individuals who are working and collecting Social Security benefits. For 2013, there have been a few changes. The maximum amount of earnings to still receive full benefits is as follows:
- Full retirement age: No limit on earnings
- In the year full retirement age is reached, the maximum goes to $40,080 from $38,880. $1 in benefits will be withheld (or taxed) for every $3 in earnings above this threshold.
- If you are under full retirement age, your earnings limit is rising to $15,120 from $14,640. $1 in benefits will be withheld (or taxed) for every $2 in earnings above this threshold.
Medicare Part B premiums (medical insurance) have been revised for 2013. The standard Medicare Part B monthly premium will be $104.90 in 2013. Also the Part B deductible for 2013 will be $147. There are also increases in Part B costs for other earnings brackets, indicated accordingly.
As always, if you have any questions regarding your financial planning, please do not hesitate to give us a call. We’ll be happy to help you.