Join Early Retirement Today
Reply
 
Thread Tools Display Modes
SS Cola Apply to non-recipents?
Old 10-19-2011, 01:06 PM   #1
Dryer sheet wannabe
 
Join Date: Feb 2011
Posts: 15
SS Cola Apply to non-recipents?

For those of us NOT taking SS at 62 - how does the recent SS Cola increase affect us down the road? In other words, will we see an increase in our expected payout when we access the SS web site next year?

I plan on taking SS at age 64 (in two years) and am wondering if this announcement will change what I am expected to receive.
MC1550 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-19-2011, 01:15 PM   #2
 
Posts: n/a
The Cola adjusted rate for 2012 becomes the permanent rate going forward. If there is another adjusted rate in January 2013 that will be what you receive when you retire in two years. If there is no increased rate in 2013 you will receive the new 2012 rate..
  Reply With Quote
Old 10-19-2011, 01:19 PM   #3
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
Yes, it will.

If you use the on-line estimator, the files are updated the evening of the last day of the month, therefore run it on Jan 1, 2012 to see your new rates.

Estimate Your Retirement Benefits

BTW, if you are age 62 but have not filed for benefits, you can run the estimator every month and see your monthly rate increase from age 62 to age 66 (FRA age).
rescueme is offline   Reply With Quote
Old 10-19-2011, 07:25 PM   #4
Recycles dryer sheets
thefinancebuff's Avatar
 
Join Date: Dec 2008
Posts: 299
The recipient's COLA goes up by the CPI-W. The AIME and resulting PIA etc go up by the wage index. The two indexes don't go up by the same amount. 3.6% COLA this year for the recipients but only 3.1% increase in the wage index for non-recipients. Theoretically we can have high inflation due to non-labor input prices (think oil, metals) but wages are held down due to unemployment. Then recipients will get good COLA but non-recipients don't get as much.
thefinancebuff is offline   Reply With Quote
Old 10-19-2011, 08:33 PM   #5
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 410
Quote:
Originally Posted by thefinancebuff View Post
The recipient's COLA goes up by the CPI-W. The AIME and resulting PIA etc go up by the wage index. The two indexes don't go up by the same amount. 3.6% COLA this year for the recipients but only 3.1% increase in the wage index for non-recipients. Theoretically we can have high inflation due to non-labor input prices (think oil, metals) but wages are held down due to unemployment. Then recipients will get good COLA but non-recipients don't get as much.
Where are you getting the 3.1% for the wage index?

The SSA site is showing 2.36%:

Average Wage Index (AWI)
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 10-19-2011, 09:29 PM   #6
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
Quote:
Originally Posted by thefinancebuff View Post
The recipient's COLA goes up by the CPI-W. The AIME and resulting PIA etc go up by the wage index. The two indexes don't go up by the same amount. 3.6% COLA this year for the recipients but only 3.1% increase in the wage index for non-recipients. Theoretically we can have high inflation due to non-labor input prices (think oil, metals) but wages are held down due to unemployment. Then recipients will get good COLA but non-recipients don't get as much.

I'm 62 and 6 months and haven't taken SS as of yet. My plan is to take it in Dec. of 2012 when DW turns 62. Does the statement in the above quote mean that anyone not taking SS now will get less than if we took it at 62? Seems like the 3.6% will not apply.
__________________
Work is something you do to get enough $ so you don't have to....Me.
73ss454 is offline   Reply With Quote
Old 10-19-2011, 09:40 PM   #7
Dryer sheet wannabe
 
Join Date: Feb 2011
Posts: 15
thanks for the responses on my original query. Now I wonder which is the correct amount. 2.36% or 3.1%?
MC1550 is offline   Reply With Quote
Old 10-20-2011, 05:29 AM   #8
Thinks s/he gets paid by the post
Brett_Cameron's Avatar
 
Join Date: May 2011
Location: South Eastern USA
Posts: 1,068
2.36% is the amount that average wages increased from 2009 to 2010. It is not the amount a person's PIA would increase. You have to use the PIA formula to determine how much the PIA would increase. For my case, just over 1% assuming no more wage income.
Brett_Cameron is offline   Reply With Quote
Old 10-20-2011, 08:44 PM   #9
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 410
Quote:
Originally Posted by MC1550 View Post
thanks for the responses on my original query. Now I wonder which is the correct amount. 2.36% or 3.1%?
I would think the SSA site supersedes anything else. I would like to know where the 3.1% figure came from. Wish it was 3.1%
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 10-20-2011, 08:55 PM   #10
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 410
Quote:
Originally Posted by gsparks2 View Post
2.36% is the amount that average wages increased from 2009 to 2010. It is not the amount a person's PIA would increase. You have to use the PIA formula to determine how much the PIA would increase. For my case, just over 1% assuming no more wage income.
I haven't worked in years, and my estimated benefit amount on the SSA site, always matches up exactly with the annual AWI percent change, when I figure the benefit amount manually. I've never included PIA in the calculation.
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 10-20-2011, 09:20 PM   #11
Thinks s/he gets paid by the post
Brett_Cameron's Avatar
 
Join Date: May 2011
Location: South Eastern USA
Posts: 1,068
Quote:
Originally Posted by BLS53 View Post
I haven't worked in years, and my estimated benefit amount on the SSA site, always matches up exactly with the annual AWI percent change, when I figure the benefit amount manually. I've never included PIA in the calculation.
Your results are consistent with the PIA formula as are mine.
Brett_Cameron is offline   Reply With Quote
Old 10-20-2011, 09:42 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,361
Note that the bend points in the formula also move a bit the lower from 749/month to 767 and the upper moving from4517 to 4624 This is how one gets the 2.36% bump. Note that this is a bit higher than the 2010 and the numbers actually went down for 2011.
meierlde is offline   Reply With Quote
Old 10-20-2011, 10:03 PM   #13
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 410
Quote:
Originally Posted by gsparks2 View Post
Your results are consistent with the PIA formula as are mine.
OK, we're good then. You did raise my curiosity though. I went to this page:

Primary Insurance Amount

Best I can figure the PIA is constantly changing during your working years, and they use all those "bend points" to come up with a benefit amount. Once you stop working prior to age 62, the PIA becomes a fixed number that is multiplied by the AWI every year. Now you can go through the ordeal of figuring your lifetime earnings and the bend points every year, and multiplying by the AWI. But there's really no need to do that when you can just take the current year's estimated benefit and multiply by the AWI, to get the new estimate.

Easiest way is just to wait until Jan. 1, and the SSA website estimator will do it for you. I like to do it myself when the numbers come out in Oct., just to see what I come up with.
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 10-21-2011, 05:16 AM   #14
Thinks s/he gets paid by the post
Brett_Cameron's Avatar
 
Join Date: May 2011
Location: South Eastern USA
Posts: 1,068
Quote:
Originally Posted by BLS53 View Post
OK, we're good then. You did raise my curiosity though. I went to this page:

Primary Insurance Amount

Best I can figure the PIA is constantly changing during your working years, and they use all those "bend points" to come up with a benefit amount. Once you stop working prior to age 62, the PIA becomes a fixed number that is multiplied by the AWI every year. Now you can go through the ordeal of figuring your lifetime earnings and the bend points every year, and multiplying by the AWI. But there's really no need to do that when you can just take the current year's estimated benefit and multiply by the AWI, to get the new estimate.

Easiest way is just to wait until Jan. 1, and the SSA website estimator will do it for you. I like to do it myself when the numbers come out in Oct., just to see what I come up with.
Yes, that is what I have found. I created a spreadsheet with my earnings history and all I do is update the latest average earnings and the bend points. Playing with this it seems that after not having any taxable social security earnings for a few years the increase in PIA from year to year converges to the increase in average wages.
Brett_Cameron is offline   Reply With Quote
Old 10-22-2011, 07:31 AM   #15
Recycles dryer sheets
thefinancebuff's Avatar
 
Join Date: Dec 2008
Posts: 299
Quote:
Originally Posted by BLS53 View Post
Where are you getting the 3.1% for the wage index?

The SSA site is showing 2.36%:

Average Wage Index (AWI)
When they add a new row for 2011, it will show 3.1%. The wage base will go up from 106,800 to 110,100. That's a 3.1% increase due to AWI.
thefinancebuff is offline   Reply With Quote
Old 10-22-2011, 11:19 AM   #16
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 410
Quote:
Originally Posted by thefinancebuff View Post
When they add a new row for 2011, it will show 3.1%. The wage base will go up from 106,800 to 110,100. That's a 3.1% increase due to AWI.
Sorry but that's incorrect. The AWI always lags 2 years behind the COLA. The 2012 COLA announcement coincides with the 2010 AWI publication. If you look at the bottom of the AWI page, it says "last reviewed or modified October 19, 2011". It's only updated once a year. And if you would have looked at it last month, the latest entry in the table, would have been the -1.51% for 2009.

Now, maybe you have the numbers for the 2011 AWI, and the SSA is just keeping it a secret until next year. If that is the case, some of us would like to have links to those tables and formulas, replete with back dating to previous years for cross verification with official SSA data.

For starters, lead us through the calculation of the 3.1%.
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 10-22-2011, 11:53 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
Quote:
Originally Posted by thefinancebuff View Post
The recipient's COLA goes up by the CPI-W. The AIME and resulting PIA etc go up by the wage index.
Older non-recipients also have their expected payment adjusted by the CPI-W. I don't remember what age I was, perhaps 60, perhaps 62, when I noticed that my annual statement was being adjusted differently. I was not yet drawing SS. At that time, CPI usually lagged workers' wage index.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 10-22-2011, 12:14 PM   #18
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 410
Investigating further, I see what you're doing. You're confusing the wage base for maximum earnings on which FICA taxes are paid, with the AWI. They're two separate calculations, which have nothing to do with one another.

Compare these two tables:

Contribution and Benefit Base

Average Wage Index (AWI)

You will find little correlation between the two, as far as percent changes from year to year.

The AWI is used to adjust the PIA. The wage base is used to adjust the maximum annual earnings on which FICA taxes are paid. The only common ground is they're both calculated by the SSA, are a measurement of income, and tend to go up every year. Wage base has nothing to do with estimating benefits.
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 10-22-2011, 12:18 PM   #19
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 410
Quote:
Originally Posted by haha View Post
Older non-recipients also have their expected payment adjusted by the CPI-W. I don't remember what age I was, perhaps 60, perhaps 62, when I noticed that my annual statement was being adjusted differently. I was not yet drawing SS. At that time, CPI usually lagged workers' wage index.

Ha
It shifts to COLA at age 62.
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 10-22-2011, 10:15 PM   #20
Recycles dryer sheets
thefinancebuff's Avatar
 
Join Date: Dec 2008
Posts: 299
Quote:
Originally Posted by BLS53 View Post
Investigating further, I see what you're doing. You're confusing the wage base for maximum earnings on which FICA taxes are paid, with the AWI. They're two separate calculations, which have nothing to do with one another.
From the first paragraph of the wage base page:
Quote:
Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. We call this annual limit the contribution and benefit base. For earnings in 2012, this base is $110,100.
So it seems they do have something to do with one another.

Here's the law:

http://www.ssa.gov/OP_Home/ssact/title02/0230.htm

The formula is basically:

wage base for next year = AWI for previous year / AWI for 1992 * 60,600

Then there's some rounding to nearest $300.

The formula works quite well between 2003 and 2009 (using AWI 2001-2007) but it breaks down in 2010. According to the formula the wage base should go up to $109,200 but it was held constant at $106,800. Same for 2011. Maybe it has something to do with no COLA in those two years. So the "wrong" wage base threw me off.
thefinancebuff is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Interesting COLA info mickeyd FIRE and Money 6 11-03-2011 05:39 PM
Here's Your COLA JPatrick FIRE and Money 13 10-19-2011 12:28 PM
100% Cola - for a fee Tree-dweller FIRE and Money 8 10-02-2011 01:19 PM
Cola update mickeyd FIRE and Money 14 09-25-2011 12:06 AM

» Quick Links

 
All times are GMT -6. The time now is 04:26 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.