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The Social Security Administration (SSA) recently announced that there will be no increase in retiree benefits in 2016 because of the low inflation rate. Cost-of-living adjustments (COLAs), which are based on a consumer price index for urban wage-earners, have been standard fare and most retirees expect them. In fact, this is only the third time without a yearly increase in Social Security retirement benefits since COLAs were instituted in 1975. (The other two occurred in 2010 and 2011.)
It may be small consolation, but the Social Security wage base for payroll taxes also won't go up, remaining at $118,500 in 2016. This means the first $118,500 of wages you earn in 2016 is subject to a 6.2% tax (or twice that if you're self-employed). There's also a tax for Medicare of 1.45% on all earnings.
Furthermore, the SSA has announced that the limits under the "earnings test" (the amount you can earn from working without forfeiting Social Security benefits) also are unchanged.
Did this "freeze" for 2016 catch you by surprise? If so, you're not alone. People from all walks of life, including those who already have retired, often don't fully understand the rules for Social Security or are unaware of how complex the rules are. Use this quiz to test your personal knowledge of the subject:
1. The earliest age you can begin to receive Social Security retiree benefits is:
a) age 59½.
b) age 62.
c) age 65.
d) age 70.
2. The amount you will receive if you opt for early retirement may be reduced by as much as _____ for someone born in 1960 or later.
3. To get the maximum amount of Social Security benefits, you need to wait until ______ to begin receiving benefits.
a) age 59½
b) age 62
c) age 65
d) age 70
4. Spousal benefits are available to an unmarried ex-spouse if he or she was married to the beneficiary for at least:
a) 3 years.
b) 5 years.
c) 10 years.
d) 25 years.
5. Social Security retiree benefits are partially taxable if your income exceeds ________ if you're a single tax filer and ________ if you're a joint filer.
6. The age when a Baby Boomer born between 1943 and 1954 is able to receive full retirement benefits is:
a) age 62.
b) age 65.
c) age 66.
d) age 70.
7. For 2016, the maximum amount you're allowed to earn in the year you reach full retirement age—but before the month of your birthday—without forfeiting any benefits is:
Answers: 1-b; 2-d; 3-d; 4-c; 5-b; 6-c; 7-c
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