Whether by choice or necessity, a growing number of American seniors are working well into their golden years. As of 2024, 23.4% of men and 16.2% of women over the age of 65 were still employed, according to the Bureau of Labor Statistics (BLS) (1).
Many of these seniors are also collecting Social Security benefits while at work. According to the Center for Retirement Research at Boston College, roughly 40% of individuals work after claiming benefits, often for several years (2).
The system allows beneficiaries to earn some employment income, but only up to a certain limit. Beyond these thresholds, benefits are clawed back and withheld. If you’re in this situation, understanding how the rules work and what the threshold is for income in 2026 could be a key part of your financial plans.
Here’s what you need to know.
Working while collecting benefits is permitted. However, income from your work could impact your benefits depending on your age and level of income.
If you’re below Full Retirement Age (FRA), you can earn up to $24,480 in 2026 without impacting your benefits (3). This threshold is adjusted every year and is currently 1,080 higher than the previous year. For every $2 you earn above this threshold, the Social Security Administration (SSA) will withhold $1 in benefits.
These earning restrictions are greatly relaxed in the calendar year you reach FRA. If you reach FRA in 2026, you can earn up to $65,160 — $3,000 more than the previous year — before your benefits are impacted. The withholding rate is also more generous for beneficiaries who reach FRA in 2026. The SSA will withhold only $1 for every $3 in earnings above this threshold.
Once you reach FRA and beyond, the income limit no longer applies. You can earn any amount without impacting your benefits.
Retirees probably have multiple sources of income, and fortunately, the SSA doesn’t consider all forms of income for its earnings test. Simply put, only earned income is used for the test. That means any wages, salaries or bonuses you earn from your employer. If you’re self-employed, only net income is considered for the earnings test.
Most forms of passive income, including other government benefits, investment earnings, interest, pensions, annuities and capital gains, are not included in the test.
In other words, if you’re primarily relying on passive income and only working part-time or on a casual basis, you’re unlikely to hit the thresholds that trigger benefit withholdings.
If you cross the threshold, it’s important to know that the amount withheld is not lost forever and could actually boost your benefits over the long-term.
The SSA’s earnings test is designed to withhold, not eliminate, benefits in early retirement.
Imagine you turn 62 in 2026 and start claiming benefits. You receive $1,200 a month from Social Security and earn $29,000 a year from part-time work. Because that income exceeds the annual earnings limit by $4,520, the agency withholds $2,260 — half of the amount over the threshold. In practical terms, that’s roughly two months of benefits.
If the same pattern continues and you lose about two months of payments each year until you reach full retirement age at 67, the cumulative reduction would add up to roughly 10 months. At that point, Social Security adjusts your benefit as though you had filed 50 months early rather than 60. The difference is noticeable: filing five years early normally yields about 70% of your full benefit, while filing 50 months early lifts it to roughly 74.2%.
Those additional working years can also push your benefit higher if they replace lower-earning years in your 35-year wage record. The program calculates benefits using an average of your highest years of earnings, so stronger income late in your career can lift that average — and your monthly check — for the rest of retirement.
Nevertheless, losing some of your benefits for a few years could still impact your retirement plan and budget, so make sure you account for this earnings test before you retire, claim benefits or take a new job.
A higher Medicare premium set to go into effect in 2026 will push the monthly charge above $200 for the first time, with the increase likely to erode next year’s cost-of-living increase for millions of Social Security recipients.
The premium for Medicare’s Part B, which covers doctor visits and other outpatient services, will rise 9.7% to $202.90, an increase of $17.90 from the current $185 monthly cost, the Centers for Medicare & Medicaid Services said earlier this month. It’s the largest increase since 2022, when the Part B premium jumped 15%.
The Part B deductible — the amount seniors must pay out of pocket before their coverage kicks in— is also rising about 10%, jumping to $283 next year from this year’s $257.
The Part B premium, which is deducted automatically from seniors’ monthly Social Security checks, is rising at a rate that’s three times that of inflation, partly due to a rise in underlying health care costs, Anne Montgomery, senior health policy expert at the National Committee to Preserve Social Security and Medicare (NCPSSM), said in a blog post. The Medicare premium increase means that seniors may not have much room to keep up with inflation, Max Richtman, the president and CEO of the same group, told CBS News.
“So many rely on [Social Security] for all or most of their income,” he said. “This is gonna hurt.”
The Social Security Administration set next year’s cost-of-living increase at 2.8%, which will boost the average Social Security paycheck by $56 to about $2,071 per month.
The Medicare Part B premium hike will consume about a third of next year’s COLA, effectively lowering the rate to 1.9% — far below the current inflation rate of 3%, according to NCPSSM’s analysis. People with lower monthly benefits could even see an effective COLA of zero, the group said.
Rising health care costs
Health care costs have been rising for all Americans, contributing to the sticker shock that seniors and other groups are experiencing. In 2023, Americans spent an average of $1,514 on out-of-pocket health care costs, an increase of 9% from 2020 on an inflation-adjusted basis, according to KFF.
Aside from underlying health care inflation, Medicare’s costs are also increasing because of increased demand for medical services, CMS said this month.
Working adults will also face higher health care premiums in 2026. Roughly 22 million Americans who get their health insurance through the Affordable Care Act (ACA) marketplaces will also be faced with steep rate hikes if Congress fails to extend premium tax credits, which help lower the cost for the majority of people on ACA plans.
Those credits are set to expire at the end of 2025, which became the main sticking point in the recent government shutdown. Without an extension, Americans who rely on the tax credit could see their costs more than double in 2026, KFF estimates.
Workers with employee-sponsored coverage are also likely to see their costs climb next year, with most expected to pay 6% to 7% more for their 2026 plans, according to an analysis from consultant Mercer.
The Social Security Administration on Friday announced a 2.8% cost-of-living adjustment for 2026, an increase that will automatically boost monthly payments for the program’s roughly 71 million beneficiaries starting early next year.
The increase represents an uptick from the last year’s cost-of-living adjustment, or COLA, which set the 2025 increase at 2.5%. Inflation has edged higher this year. The Labor Department said Friday that the Consumer Price Index, a closely watched gauge of U.S. inflation, rose at an annual rate of 3% in September.
Next year’s COLA increase will boost the average Social Security payment by about $56 to an average monthly benefit of $2,071, starting in January, the Social Security Administration said. People who receive Supplemental Security Income, a program for low-income and disabled people, will see their first COLA increase with their Dec. 31, 2025 check, the agency said.
The annual COLA is designed to ensure that seniors, disabled Americans and other Social Security beneficiaries don’t lose purchasing power to inflation. Even so, a recent poll by the AARP, an advocacy group for older Americans, found that many seniors think the retirement program’s inflation adjustments are falling short and that they need an annual COLA of about 5% to keep up with their daily expenses.
“The cost-of-living adjustment for Social Security is one of the few inflation-adjusted programs for retirees,” Jenn Jones, AARP’s vice president of government affairs, told CBS News. “It is incredibly important to millions of Americans, and so although it may not feel like it’s quite enough, especially after the last few years, it’s critically helpful for keeping pace with rising costs.”
In a statement, Social Security Administration Commissioner Frank Bisignano said the cost-of-living adjustment “is one way we are working to make sure benefits reflect today’s economic realities and continue to provide a foundation of security.”
How SSA calculates its annual COLA
The Social Security Administration announces the COLA each fall based on a metric known as the “Consumer Price Index for Urban Wage Earners and Clerical Workers,” or CPI-W, which tracks the average change in prices paid by workers for a basket of commonly bought goods and services.
The COLA is based on that inflation data from July through September.
Some advocates for older Americans say the CPI-W fails to accurately reflect seniors’ financial needs because it tracks younger workers, while retirees tend to face higher costs for health care, housing and some other items. Seniors on Medicare, the health insurance program for those over 65, spend 13.6% of their income on health-related expenses, more than double that of younger people, according to KFF.
Meanwhile, poverty is on the rise among America’s seniors, with the poverty rate among seniors rising to 15% last year, up from 14% in 2023, the highest among all age groups, according to recent Census data. The AARP said more older adults are struggling with the rising cost of housing and utility costs.
“Most Social Security beneficiaries aren’t working — you are on a fixed income, so any inflation increase you feel,” Jones said. “If the increases continue, it becomes difficult to figure out how you’re going to pay for all of your monthly expenses.”
How Medicare costs could impact benefits
Advocates for senior citizens say the COLA is likely to fall short, especially given forecasts for increases in Medicare’s premiums and deductibles for 2026. The Medicare premium is taken directly from seniors’ Social Security checks.
While Medicare hasn’t yet announced its 2026 premiums, its trustees report issued earlier this year projected that the standard monthly premium for Part B — which covers doctors visits and outpatient care — would likely rise to $206.50, or a 12% boost from its current rate. Deductibles are also projected to rise about 12% next year, the report said.
The result: Seniors could see most of their 2026 COLA eaten up by higher Medicare costs, the National Council on Aging said in a statement.
“COLA might reflect the inflation rate, but it is woefully insufficient for older Americans who already have high health care costs and are facing even greater increases in their Medicare costs in 2026,” Ramsey Alwin, CEO of the NCA, said in the statement.
Seniors are likely to be disappointed by the 2026 COLA, which represents the second-smallest bump since 2021. Many are at risk of falling behind, according to the National Committee to Preserve Social Security and Medicare, an advocacy group.
The Consumer Price Index for September, also released on Friday, showed that medical and elderly care costs are surpassing the 3% annualized pace of inflation. Costs for caring for the elderly at home jumped 11.6% last month on an annual basis, while medical services rose 3.9%.
“Seniors on fixed incomes are rightly concerned that the Social Security COLA is not keeping pace with the true impact of inflation on their living costs, especially in areas where prices are soaring. Medical, housing and grocery costs are outstripping the COLA,” Max Richtman, the group’s CEO, said in a statement.
A delayed inflation report on Friday is expected to deliver sobering data about the direction of U.S. prices, with economists forecasting that the Consumer Price Index in September rose at its fastest pace in 16 months.
CPI last month is projected to have risen 3.1% on an annual basis, which would be the highest since the inflation gauge hit 3.3% in May of 2024, according to economists polled by FactSet. The CPI measures price changes in a basket of goods and services typically bought by consumers.
The Bureau of Labor Statistics is scheduled to release the September CPI report on Friday at 8:30 a.m. Eastern time, or nine days later than it had originally been scheduled to issue the report before the U.S. government shutdown.
Most federal economic data releases have been suspended during the stalemate. The Department of Labor is making an exception for the September CPI data because the inflation rate is needed to determine the Social Security Administration’s annual cost-of-living adjustment for beneficiaries, which is also scheduled to be announced on Friday.
Inflation has crept higher this year, edging farther away from the Federal Reserve’s annual 2% target, partly due to the Trump administration’s wide-ranging tariffs, according to economists. U.S. companies that import goods from other nations are on the hook for paying the tariffs, and they are passing on as much as 55% of those import taxes to consumers in the form of higher prices, according to a Goldman Sachs analysis.
“The forthcoming September CPI data will confirm a renewed acceleration in inflation, with price momentum evident across both goods and services,” EY-Parthenon Chief Economist Gregory Daco predicted Thursday a research note. “The tariff impact is increasingly visible, though pass-through remains gradual and uneven.”
Prices today are rising far more slowly than during their peak growth in June of 2022, when the CPI hit a 40-year high of 9.1% and spurred the Federal Reserve to ratchet up interest rates in a bid to quash inflation. When borrowing becomes more expensive, consumers and businesses tend to cut back on spending, which helps temper inflation.
But the recent uptick in inflation is souring some Americans on the economy, with 59% of those polled by CBS News earlier this month saying they feel the economy is getting worse. About two-thirds said they had noticed prices going up in recent weeks.
How will inflation impact the Social Security COLA?
The Social Security Administration on Friday is also expected to release its annual cost-of-living adjustment, basing its calculation on the inflation rate from July through September.
That yearly financial bump, which ensures that 75 million Social Security recipients don’t lose purchasing power as prices rise, is expected to come in at around 2.7%, slightly higher than the 2.5% increase beneficiaries received in 2025, according to the Senior Citizens League, an advocacy group.
A 2.7% boost in benefits would lift the average monthly Social Security payment for retired workers by $54, from $2,008 to $2,062. Yet some advocates for senior citizens are concerned that retirees could face a financial pinch if prices continue to climb beyond their 2026 Social Security adjustment.
What’s the inflation outlook?
Despite the recent rise in consumer prices, the Federal Reserve and most private economists expect inflation to ease next year. In September, the Fed forecast that the Personal Consumption Expenditures — a measure of consumer spending and the central bank’s preferred barometer of inflation — would show prices rising at a 3% annual rate in 2025, but then drop to 2.6% next year.
The impact of U.S. tariffs on inflation has been more muted than what many economists were forecasting earlier this year, Seema Shah, chief global strategist at Principal Asset Management, said in an email. Companies have helped blunt the impact by expanding their inventories before the tariffs took effect, as well as absorbing some of the costs in the form of lower profits, she said.
But there’s a risk those strategies might not work for long, she added.
“As inventories deplete, trade routes narrow and margins continue to shrink, firms may be forced to pass on higher costs to consumers,” she wrote. “As such, upside risks remain. If pricing pressures spill over into services, it could signal a broader and more persistent inflationary trend.”
It looks official — a letter stamped with the U.S. Supreme Court seal, signed by Chief Justice John Roberts and Associate Supreme Court Justice Sonia Sotomayor, warning that you’re under investigation. But it’s a scam — one designed to steal money from Social Security recipients, according to the agency’s watchdog division.
The fake SCOTUS letter prompted an Oct. 8 warning from the Social Security Administration’s Office of the Inspector General, cautioning the program’s 75 million beneficiaries to be on alert if they receive a purported letter from the nation’s highest court.
While the warning didn’t disclose how many Social Security recipients have been targeted by the fraud, the watchdog group said the hoax marks the evolution of government imposter scams, such as the decade-old scheme in which criminals pretend to be IRS officials informing their target victims that they’re under investigation for tax fraud. The threat of an IRS probe has long been used by scammers to scare individuals into providing money or private data such as Social Security numbers.
In this latest version of the same scheme, fraudsters are impersonating Supreme Court justices, rather than IRS officials. The new scam relies on multiple points of contact, with a fake letter followed by a text or call from the fraudsters, making it appear more authentic, said John Haraburda, Transaction Network Services (TNS) robocall data expert and director of product management.
“The fraudsters get very, very smart,” Haraburda said. “They do the mailing, then they’ll send you a text from the number they’re going to use for the phone call saying, ‘This is the Social Security Administration — we’re going to be calling you from this number in a few seconds.’”
He added, “Then you’ve got this text message in a way authenticating the call that’s coming in. That lets you break down your hesitation, to basically drop your guard.”
According to the Social Security Inspector General, the scam letter is personally addressed to the would-be victim, warning that they’re a suspect in connection with legal proceedings and criminal charges. It also falsely claims their Social Security number has been compromised.
The fake letter goes on to say that the Supreme Court has requested financial institutions to freeze the recipient’s assets, and urges them to cooperate with “the U.S. Treasury Department,” the watchdog agency said.
“The letter ominously closes by stating, should the recipient encounter any difficulties in safeguarding assets, the recipient will bear full liability for any losses incurred following the suspension of their SSN,” the SSA’s inspector general said. “Scammers most likely will follow up with text messages or telephone calls.”
Scammers may follow up with a text that includes a link to a fake Social Security site, which will capture the victim’s login and password as they attempt to gain access to their accounts, or might ask for credit card info, Haraburda said.
Never click on a link in an email or text that purports to be from an official, he noted. Instead, go directly to the Social Security site — https://www.ssa.gov — to log in.
“On every level, this letter is completely false,” Michelle L. Anderson, acting inspector general at the Social Security Administration’s Office of the Inspector General said in a statement. “These criminals are falsely accusing an individual of a crime and using federal agencies and federal officials to try to scare and legitimize their scam — if you get this type of letter, rip it up and report it.”
The Social Security Administration’s annual announcement setting next year’s cost-of-living adjustment, or COLA, will be delayed because of the government shutdown, the agency said.
Each year, the Social Security Administration adjusts benefits for its 75 million recipients based on recent inflation data, which ensures that seniors, disabled Americans and other beneficiaries don’t lose purchasing power as prices rise.
Social Security had planned to announce the new COLA on Oct. 15, the same day the Labor Department was scheduled to release September Consumer Price Index data, a key measure of inflation. The COLA is determined by inflation figures for the third quarter, which covers July through September.
With much of the government’s economic data on hold until Congress approves federal funding, the Bureau of Labor Statistics now plans to release its latest CPI figures on Oct. 24, about nine days later than planned. The Social Security Administration told CBS News it plans to issue its COLA announcement that same day.
“The Bureau of Labor Statistics has announced they will issue the September 2025 Consumer Price Index on October 24,” the Social Security Administration said in an Oct. 14 email. “The Social Security Administration will use this release to generate and announce the 2026 cost-of-living adjustment on October 24 as well.”
The new COLA will take effect starting Jan. 1, 2026, without any delays due to the ongoing shutdown, the agency added.
How much of a living adjustment?
According to an estimate published last month by the Senior Citizens League, the annual COLA for 2026 could be around 2.7%, slightly higher than the 2.5% increase beneficiaries received in 2025.
The League, an advocacy group for older Americans, based its most recent projection on August inflation data from the Bureau of Labor Statistics. Because the SSA will also include September inflation data in its COLA rate, that number could change when it’s announced later this month.
AARP, another advocacy group for older people, expects the 2026 COLA to range from 2.6% to 2.9%. A 2.7% boost in benefits would lift the average monthly payment for retired workers by $54, from $2,008 to $2,062.
Where is inflation now?
The September CPI is forecast to rise to an annual rate of 3.1% up from 2.9% in August, according to economists polled by FactSet.
According to economists, inflation is edging higher due partly to the impact of the Trump administration’s tariffs, which have hit imports from across the globe, such as clothing, food, steel and toys. While some businesses stockpiled imported goods earlier this year to avoid raising rising prices, some are now passing the import taxes on to their customers.
“Core goods pressures have started to heat up, marking the beginning of a delayed tariff passthrough,” RBC economists Michael Reid and Carrie Freestone said in an Oct. 14 report. “Concerningly, the breadth of inflationary pressures has widened — 45% of CPI basket items are now reporting price growth at or above 3%, compared to roughly two-thirds pre-pandemic.”
Some retirees could face a financial pinch if prices continues to climb and their 2026 Social Security adjustment fails to keep pace with inflation. The Federal Reserve forecasts that the Personal Consumption Expenditures price index, its favored measure of inflation, will rise to 3.1% this year before receding to 2.6% in 2026.
Treasury Secretary Scott Bessent on Monday tapped Social Security Administration Commissioner Frank Bisignano to take on a second role as CEO of the IRS, a newly created position at the tax agency.
The Treasury Department said in a statement that Bisignano will be responsible for overseeing all daily operations operations at the IRS, while also continuing to serve in his role heading the federal agency that administers Social Security.
Bessent said in the statement that the IRS and SSA “share many of the same technological and customer service goals. This makes Mr. Bisignano a natural choice for this role.”
The appointment comes after several recent leadership changes at the IRS, with its most recent commissioner, former auctioneer and congressman Billy Long, stepping down in August after only two months on the job. Unlike previous IRS leaders, Long lacked a background in either accounting or tax law.
Bisignano is a former Wall Street executive and CEO of Fiserv, a payments and financial services firm. In his role as IRS CEO, he’ll report to Bessent, who will continue to serve as acting commissioner of the IRS, according to the Treasury Department.
Bisignano’s appointment to a second high-profile federal job raises concerns about his ability to oversee two major government agencies, according to Social Security advocates, who say that the SSA now faces multiple challenges as a result of the Trump administration cutting thousands of jobs at the agency earlier this year.
“Never in Social Security’s 90-year history has a commissioner held a second job,” said Nancy Altman, president of Social Security Works, in an email. “Bisignano’s new role will leave a leadership vacuum at the top of the agency, especially since the Republican Senate hasn’t even confirmed a deputy commissioner.”
Added Max Richtman, CEO of another advocacy group, the National Committee to Preserve Social Security and Medicare: “Seniors, people with disabilities and their families deserve a full-time Social Security Commissioner. Full stop.”
In an email to CBS News, the Social Security Administration said Bisignano will “lead the day-to-day operations at IRS,” and that his appointment to the role “speaks to the incredible customer service turnaround that is happening at SSA.”
The agency added, “In just five months since his confirmation, SSA is serving more customers efficiently and accurately due to technology and process management improvements. In his new role, Commissioner Bisignano will still lead SSA, along with the incredibly talented executive leadership team he has assembled since his Senate confirmation.”
In the statement, Bessent said that Bisignano “has already made important and substantial progress [at the SSA], and we are pleased that he will bring this expertise to the IRS as we sharpen our focus on collections, privacy, and customer service in order to deliver better outcomes for hardworking Americans.”
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
After 85 years of sending out paper checks to retirees, the Social Security Administration (SSA) is transitioning to electronic payments in what it says is an effort to modernize its services and improve efficiency.
Starting Sept. 30, the SSA will no longer issue paper checks to its nearly 70 million recipients, instead sending benefits through either direct deposit or a prepaid debit card.
“We have been communicating directly with beneficiaries since July 1, and we have worked diligently to ensure that the less than one percent of individuals who receive paper checks have ample time to enroll in direct deposit or receive Direct Express cards,” a Social Security spokesperson told CBS MoneyWatch in an email on Tuesday.
“By moving to electronic payments exclusively, we aim to improve efficiency, security, and ensure beneficiaries receive their monthly benefits promptly,” they added.
The Social Security Administration has emphasized that electronic payments provide a safer and more secure way to receive benefits compared with paper checks, which the agency says are 16 times more likely to be lost or stolen. Eliminating paper checks is also a cost-saving measure: Checks cost 50 cents each, compared with 15 cents for an electronic funds transfer.
In an online post, the Social Security Administration said it was sending notices to people who receive paper checks to alert them of the change. The agency encouraged paper check recipients to switch to the new payment options before the deadline to ensure they receive their benefits in a timely fashion.
The Social Security spokesperson declined to comment on how people were contacted or on the current status of its outreach.
Exceptions for some paper checks
While the agency is pulling away from paper checks, there are some exceptions. The spokesperson confirmed to CBS MoneyWatch that the agency will continue to issue paper checks to people who have no other way to receive payments, echoing what it told CBS News in July after it announced the move to electronic payments.
President Donald Trump set the shift away from paper checks in motion with a March 2025 executive order that mandated all federal payments be digitized. Paper-based checks, the White House said at the time, impose “unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.”
Advocates including Senator Elizabeth Warren, a Democrat from Massachusetts, have argued that the roughly 600,000 people who rely on the agency’s original payment system often need paper checks because they’re unable to receive electronic deposits.
This classic poster was distributed from November 1936 to November 1937 during the initial issuance of Social Security numbers through U.S. post offices and with the help of labor unions.
Social Security Administration
That includes people who are “unbanked,” or those who lack access to traditional bank accounts. According to an August report from Bankrate, the unbanked represent 4.6% of the U.S. population, and tend to rely more on check-cashing services and other alternative forms of payment to manage their finances.
While the Social Security Act was signed into law in 1935 by President Franklin D. Roosevelt, it wasn’t until 1940 that the agency began sending paper checks to retired workers and their dependents as well as to survivors of deceased insured workers. The first recipient of the monthly benefit was a woman named Ida M. Fuller.
A Vermont native, Fuller worked as a teacher before becoming a legal secretary. After filing her retirement claim in 1939, she stopped by the Social Security office in Rutland, Vermont, the town where she once attended school, to inquire about her benefits. She had paid into the relatively new program for about three years, according to the Social Security Administration.
“It wasn’t that I expected anything, mind you, but I knew I’d been paying for something called Social Security and I wanted to ask the people in Rutland about it,” she said.
Fuller’s first monthly check, issued on January 31, 1940, was for $22.54.
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
Social Security beneficiaries could see a 2.7% cost-of-living adjustment (COLA) in 2026, which is slightly above the 2.5% increase U.S. retirees received in 2025.
That’s according to an estimate from the Senior Citizens League, which recently posted its latest COLA prediction based on August inflation figures figures from the Bureau of Labor Statistics. The Virginia advocacy group has released nine COLA estimates so far this year, based on monthly BLS data.
According to the group, a 2.7% COLA would raise the average monthly benefit for retired workers by $54, from $2,008 to $2,062. The Senior Citizens League predicted the same cost-of-living adjustment in August.
The cost-of-living adjustment has averaged 2.6% over the last 20 years, according to the Senior Citizens League. A COLA of 2.7% would be higher than this year’s adjustment of 2.5%, but below the 3.2% boost seniors received in 2024.
The Social Security Administration (SSA) makes a cost-of-living adjustment each year based on inflation data from July, August and September. Thursday’s CPI report shows that the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the figure the SSA uses to make its annual adjustment, increased 2.8% on an annual basis in August, up from 2.5% the month prior.
The SSA is scheduled to announce its adjustment in October, which would go into effect in January 2026. “This year, the COLA will be determined on October 15, when the Bureau of Labor and Statistics releases the CPI-W for September,” the agency told CBS MoneyWatch.
The COLA is intended to ensure that benefits payments for U.S. seniors keep pace with inflation. However, economists have warned that a 2.7% adjustment may not be enough to stave off the inflationary pressures Americans are facing.
The CPI report released Thursday suggest that inflation is on the rise with CPI rising 2.9% on an annual basis in August compared to 2.7% in July. Imported products such as coffee and furniture have grown more expensive since last year, which economists point out could be due to tariffs pushing up prices.
Routine monthly paycheck reductions for certain Social Security recipients could also cancel out the cost-of-living adjustment, Shannon Benton, the executive director of the Senior Citizens League, told CBS MoneyWatch in an email.
“The latest projection of a 2.7% cost-of-living adjustment for 2026 is certainly better than nothing,” said Benton, “but for many seniors, that gain may quickly disappear once higher Medicare Part B premiums are deducted, turning what should be a raise into a wash.”
She added, “For those living on fixed incomes, it’s another reminder of the gap between benefits and real-world costs.”
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
The Interior Department said U.S. Park Police Chief Jessica Taylor will be retiring from the force to take on a new role with the Social Security Administration.
U.S. Park Police Chief Jessica Taylor (Courtesy National Park Service, file)
U.S. Park Police Chief Jessica Taylor (Courtesy National Park Service, file)
U.S. Park Police Chief Jessica Taylor will be retiring from the force to take on a new role with the Social Security Administration, according to the Department of the Interior.
Taylor will serve as the chief security and resiliency officer, which will make up part of the SSA’s newly announced executive leadership team.
The announcement of her retirement comes after WTOP previously reported on an order placing the Park Police under the direct supervision of the Secretary of the Interior.
In announcing the decision, Interior Secretary Doug Burgum praised Taylor for her “unwavering commitment to public service and her dedication to keeping our cities, landmarks, and public spaces safe.”
“Chief Taylor’s leadership, integrity, and service to this country will leave a lasting legacy that will be felt for generations to come,” Burgum added.
Taylor took over the department in 2023, several months after the abrupt retirement of her predecessor, Pamela Smith, who now leads the D.C. police.
In the announcement, Taylor said leading the U.S. Park Police has been the greatest honor of her career.
“I leave with immense gratitude and deep respect for this Force and everyone who works with grit and integrity serving in the United States Park Police,” Taylor said.
The Interior Department said Taylor will continue to assist with the “crucial” law enforcement surge in the District until her last day on Sept. 20. Her successor is expected to be named in the coming weeks.
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Charles Borges, the chief data officer at the Social Security Administration, resigned Friday — days after filing a whistleblower complaint about Department of Government Efficiency employees at the SSA.
He said in the complaint that the DOGE employees had uploaded a copy of the entire country’s Social Security information to a “vulnerable cloud environment.” Borges’ resignation from the SSA was confirmed by the Government Accountability Project, which is providing his legal representation.
A Social Security Administration spokesperson refuted the claim in a statement, saying that the data referenced had been “walled off” from the internet, and the SSA is “not aware of any compromise to this environment.”
“The data referenced in the complaint is stored in a long-standing environment used by SSA and walled off from the internet,” the spokesperson said.
In June, the Supreme Court temporarily lifted a lower court’s injunction and cleared the way to allow DOGE to access sensitive Social Security information. Two labor unions and an advocacy group had filed a complaint claiming that allowing the access would violate the Privacy Act and a federal law. A lower court agreed with the plaintiffs and issued an injunction, and an appellate court also declined to lift the stay. Solicitor General D. John Sauer then appealed to the Supreme Court, arguing that the injunction was forcing the executive branch to stop federal employees tasked with modernizing government systems from accessing the data contained within them.
In Borges’ resignation letter, sent Friday to SSA Commissioner Frank Bisignano, he wrote that he was resigning involuntarily because of “SSA’s actions against me, which make my duties impossible to perform legally and ethically.” He said his departure constituted a “constructive discharge.”
Borges said in his letter that he has faced retaliation since he reported his concerns internally and subsequently submitted his whistleblower complaint. “I have suffered exclusion, isolation, internal strife, and a culture of fear, creating a hostile work environment and making work conditions intolerable,” he wrote.
He alleged that “newly installed leadership” in the IT and executive offices at SSA “created a culture of panic and dread, with minimal information sharing, frequent discussions on employee termination.” And Borges claimed that repeated requests for visibility into activities he found questionable were “rebuffed or ignored by agency leadership.”
Andrea Meza, a GAP attorney representing Borges, said in a statement that Borges “no longer felt that he could continue to work for the Social Security Administration in good conscience given what he had witnessed.” Meza said Borges “will continue to work with the proper oversight bodies.”
Borges had served as SSA’s chief data officer since January. Before that, he worked at the Centers for Disease Control and Prevention and was a White House Presidential Innovation fellow during the Biden administration, according to LinkedIn. He had also served in data handling roles in the Naval Air Warfare Center Aircraft Division and the Naval Air Systems Command.
On LinkedIn Friday, he wrote, “It is never wrong to be morally and ethically right with yourself.”
Asked about Borges, an SSA spokesperson declined to comment on personnel matters.
Aaron Navarro is a CBS News digital reporter covering the 2024 elections. He was previously an associate producer for the CBS News political unit in the 2021 and 2022 election cycles.
Within weeks of Donald Trump’s second inaugural, members of Elon Musk’s Department of Government Efficiency team showed up at the Social Security Administration and started demanding access to files. The efforts were not well received: Michelle King, in her capacity as the acting Social Security commissioner, resigned after she refused a DOGE request to access sensitive government records at the agency.
Members of the Department of Government Efficiency uploaded a copy of a crucial Social Security database in June to a vulnerable cloud server, putting the personal information of hundreds of millions of Americans at risk of being leaked or hacked, according to a whistle-blower complaint filed by the Social Security Administration’s chief data officer. The database contains records of all Social Security numbers issued by the federal government.
The Times’ report added that the database in question “includes individuals’ full names, addresses and birth dates, among other details that could be used to steal their identities, making it one of the nation’s most sensitive repositories of personal information.”
It’s an open question as to why, exactly, DOGE would even want to upload such a database. (The controversial operation is ostensibly searching for fraud within the Social Security system, though its previous claims on the matter have fallen apart under scrutiny.)
The whistleblower in this case is Charles Borges, the Social Security Administration’s chief data officer, who alleges that DOGE members copied the highly sensitive data without any kind of “independent security monitoring,” which in turn created “enormous vulnerabilities.”
Borges didn’t say that the database had been breached, but his complaint added that there was no oversight to assess how and why DOGE was using the data. The Times’ report added:
‘Should bad actors gain access to this cloud environment, Americans may be susceptible to widespread identity theft, may lose vital health care and food benefits, and the government may be responsible for reissuing every American a new Social Security number at great cost,’ Mr. Borges’s complaint said. He alleged that DOGE did not involve him in discussions about the project, despite his role as chief data officer, leaving him to piece together evidence of what had happened after the fact.
A spokesperson for the department said in a written statement, “Commissioner [Frank] Bisignano and the Social Security Administration take all whistleblower complaints seriously. SSA stores all personal data in secure environments that have robust safeguards in place to protect vital information.
“The data referenced in the complaint is stored in a long-standing environment used by SSA and walled off from the internet. High-level career SSA officials have administrative access to this system with oversight by SSA’s Information Security team. We are not aware of any compromise to this environment and remain dedicated to protecting sensitive personal data.”
In recent months, a variety of federal whistleblowers have come forward, and for the most part, the congressional Republican majority has ignored them — even when confirming Bisignano to lead the Social Security Administration. Whether GOP lawmakers express similar indifference to Borges remains to be seen. Watch this space.
This article was originally published on MSNBC.com
Social Security is the foundation for many Americans’ retirement plans. However, not everyone knows all of the details of how the government program works. There are a few foundational rules everyone should know, but many Americans’ knowledge falls short for even the most basic and important rules governing the program.
If you don’t know the basics of how Social Security works, making an informed decision about when to claim your retirement benefits becomes impossible. Applying for benefits too early (or too late) can have serious long-term ramifications on your retirement goals. Unfortunately, almost half of Americans maintain an incorrect belief about how claiming benefits early will impact their monthly benefit, according to a recent survey from Nationwide.
Image source: Getty Images.
A costly mistaken belief
In the survey, 48% of Americans incorrectly identified the following statement as true: “If I claim benefits early, my benefits will go up automatically when reaching full retirement age.”
Most readers will reach full retirement age at 67 despite becoming eligible to claim Social Security benefits at age 62. But there’s no free lunch when it comes to these benefits. The truth is claiming your benefits before you reach full retirement age will permanently reduce your monthly benefit.
The following table shows just how much less you can expect to receive relative to your full retirement age if you claim early.
Claiming Age
% of Full Benefit
62
70%
63
75%
64
80%
65
86.7%
66
93.3%
67
100%
For Americans with a full retirement age of 67 (born in 1960 or later). Table source: Author. Data source: Social Security Administration.
Why is this misunderstanding so prevalent?
There’s a reason why many people may maintain the mistaken belief that you’ll see a bump in benefits upon reaching full retirement age. That’s because sometimes you actually do. But that’s only due to another commonly misunderstood rule: the Social Security earnings test.
The Social Security earnings test says if you earn over a certain amount while collecting retirement benefits before your full retirement age, the Social Security Administration will withhold some of your monthly benefits. The amount withheld is factored back into your monthly benefit once you reach full retirement age. At that point, the earnings test no longer applies, and the SSA no longer withholds any of your benefit.
In this context, the ultimate size of your check is primarily determined by the age at which you initially apply for Social Security. If you never exceed the earnings test threshold in a given year, you’ll never see a change in the amount you collect besides the annual COLA.
Many Americans are unaware of how the Social Security earnings test works as well. Just 56% of survey respondents correctly answered a question about it in Nationwide’s survey.
The earnings test is the exception to the rule, not the rule itself. It’s important to make that distinction to avoid confusion when making a decision about when to claim benefits.
It pays to delay
All things being equal, it’s typically beneficial to wait to claim your benefits, possibly even beyond your full retirement age.
If you opt to wait to claim your benefits, the Social Security Administration will increase your monthly benefit by 2/3 of a percentage point for each month you delay beyond full retirement age. Those delayed retirement credits max out at age 70, which means someone with a full retirement age of 67 can receive a 24% boost to their monthly checks.
A 2019 study from United Income found the majority of seniors (57%) would be better off by waiting until age 70 to claim their retirement benefits. Just 8% would benefit from claiming before age 65.
There are plenty of good reasons to claim early, though.
For one, if the quality of your life with the supplemental income is significantly higher than without, then it probably makes sense to claim it when you need it. There are steps you can take later if your situation improves to mitigate the impact of claiming early.
Another situation is when you have a reasonable expectation that you’ll pass away earlier than your peers. Social Security is designed to pay out roughly the same amount in lifetime benefits for someone living an average life expectancy regardless of when they claim. But if you suffer from a condition that curbs your life expectancy, it might make sense to claim your benefits earlier.
No matter when you decide to claim, be sure you do it with a complete understanding of how your claiming age impacts your monthly benefit and whether or not you should actually expect your benefit to increase in the future.
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The roughly 70 million people who receive Social Security payments will soon learn how much they’ll receive in their 2025 benefit checks, with the program’s annual cost-of-living adjustment (COLA) to be announced within days.
Each fall, the Social Security Administration sets its annual COLA based on the recent rate of inflation, part of an overhaul to the program that began in the 1970s that ensures senior citizens and other beneficiaries aren’t losing purchasing power in the face of rising prices.
When will the 2025 Social Security COLA be announced?
Typically, the Social Security Administration announces its annual COLA on the same day the Labor Department releases its September inflation report, with the benefits announcement released shortly after the inflation data.
The September Consumer Price Index report is scheduled to be issued on Thursday, Oct. 10.
What will the COLA be for Social Security in 2025?
The 2025 cost-of-living adjustment is forecast to come in at about 2.5%, according to the Senior Citizens League (TSCL), an advocacy group for older Americans.
That will mark the smallest COLA since 2021, when seniors received a 1.3% adjustment due to the pandemic’s low rate of inflation. Because inflation surged in 2022 and 2023, Social Security provided unusually large COLAs for those years, at 5.9% and 8.7%, respectively.
Seniors received a 3.2% COLA for the current year.
How would that impact Social Security benefits?
The average Social Security check for retirees stands at $1,907 in 2024, according to the Social Security Administration.
If the agency announces a 2.5% COLA increase for 2025, as forecast, the typical benefit check would rise by about $48 a month, for a total of $1,955 per payment.
What is the VA benefits COLA increase for 2025?
Earlier this month, Congress passed a new law that ties veterans’ benefits to Social Security’s cost-of-living increase. Called the Veterans’ Compensation Cost-of-Living Adjustment Act of 2024, the law directs the VA to increase veterans’ benefits by the same inflation adjustment percentage as Social Security payments.
“Boosting our veterans’ hard-earned benefits to keep pace with the cost of living is a necessary cost of war,” said Sen. Jon Tester, a Democrat from Montana who co-sponsored the bill, in a statement.
The COLA increase for VA benefits will apply to disability payments, clothing allowances and dependency and indemnity compensation for surviving spouses and children, according to Military.com.
Based on the Senior Citizens League’s forecast, those VA benefits would increase by 2.5% next year.
What is the current rate of inflation?
Inflation has cooled considerably after hitting a 40-year high of 9.1% in June 2022. The Federal Reserve engineered a flurry of rate hikes that have helped to drive down inflation, which stood at 2.5% on an annual basis in August — its lowest in three years.
Inflation is expected to continue to cool, with economists forecasting that the rate of price increases slipped to 2.3% in September, according to financial data firm FactSet.
The Social Security Administration sets its annual COLA based on inflation during the third quarter, or from July through September.
The agency takes the average inflation rate over that period from what’s known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks spending by working Americans. Because inflation has receded during the past several months, the 2025 COLA is expected to be lower than in prior years.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
Social Security is edging closer to a financial cliff that could eventually lead to sharp benefit cuts for 70 million Americans, with a typical couple facing an annual payment reduction of $16,500 in 2033, according to a recent analysis from the Committee for a Responsible Federal Budget.
A middle-income single worker would see their benefits cut by $8,200 per year, according to the group, a nonpartisan advocacy organization focused on fiscal issues.
The analysis is based on a dual-income couple with medium career earnings, or individual annual pay of about $63,000 a year. Notably, it also assumes that the Social Security system isn’t repaired before its trust fund is projected to become insolvent in 2033 — an outcome many experts have long said is unlikely given the political consequences to both parties of slashing benefits.
The main Social Security fund, called the Old-Age and Survivors Insurance (OASI) Trust Fund, is a $2.6 trillion pool of money that funds benefits and other program costs. Because Social Security currently is paying out more in benefits than it receives through taxes, thanks partly to the massive waves of retiring baby boomers, the agency is now tapping the trust fund to provide the benefits promised to retirees.
Clock is ticking
But without changes, the trust fund is slated to be drained by 2033, which would result in an automatic 21% cut to beneficiaries’ monthly checks, regardless of marital or income status, the CRFB analysis found. That could prove devastating to both current and future retirees, with many of the former already financially stretched and given that 4 in 10 seniors live solely on the average Social Security monthly benefit of $1,907.
“The result would likely lead to a spike in poverty rates for older Americans,” Shannon Benton, executive director of the advocacy group Senior Citizens League, told CBS MoneyWatch. “Given that low-paid workers are less likely to save for retirement compared to higher-income Americans, they are often more reliant on Social Security in their later years.”
Social Security would be further destabilized if it takes longer for lawmakers to fix program, noted Chris Towner, policy director at the CRFB.
“There is a cost of waiting to fix the program,” he said. “It could be fixed right now with a 27% tax increase or a 21% benefit cut to all beneficiaries, while waiting would make the tax increase grow to 32% and the cut to 25%.”
Social Security cuts by income
Although Social Security faces fiscal challenges, many Americans misunderstand what insolvency for the program would mean, experts caution. For instance, about 8 in 10 U.S. adults worry that Social Security “won’t be available” when they are old enough to receive it, a recent Gallup poll found.
But Social Security isn’t going anywhere, emphasized Nancy Altman, president of Social Security Works, an advocacy group for the program. Even if the trust fund is depleted, the program will continue to be funded by workers’ payroll taxes and will pay out about 79% of promised benefits, she noted.
“There’s a lot of misinformation, like the program will just disappear, and that isn’t going to happen,” Altman said. “The best way to look at it is that [possible insolvency] is an action-forcing event. It’s not that they will get no benefits, but Congress really needs to act” to avoid cuts.
If the trust fund is depleted, retirees and other beneficiaries would still get checks, although their payments would deliver about 79 cents on every $1 of promised benefits due to the funding shortfall.
That means a single middle-income worker, with earnings of about $63,400 per year, would see their Social Security payment decline from $3,275 per month prior to insolvency to about $2,592 per month if the trust fund isn’t shored up. On an annual basis, that’s a loss of $8,200 in Social Security benefits.
So how likely are Social Security cuts?
Major benefit cuts are extremely unlikely to become a reality, Altman of Social Security Works predicted. That’s partly because Social Security is viewed as a “third rail” of politics — one that could motivate many Americans to vote against lawmakers perceived as fiddling while the program burns.
“It’s literally inconceivable that Congress wouldn’t act,” Altman said. “Every single member of Congress would be voted out — people would be so furious.”
Already, there are a number of proposals floated by lawmakers on how to buttress Social Security, ranging from either boosting taxes to cutting benefits, or a mix of the two ideas.
So far, Vice President Kamala Harris and former President Donald Trump have both vowed to protect Social Security, but neither has put forward a detailed plan about how they would do so, noted Benton of the Senior Citizens League.
“The Senior Citizens League would like to know what the presidential candidates would do, if elected, to address the looming insolvency issue,” she said.
Range of fixes
Trump has proposed eliminating income taxes on Social Security benefits, but his plan would actually worsen the program’s financial outlook because those taxes currently directly fund benefits. Without those taxes, Social Security would be forced to cut benefits a year earlier than currently forecast, experts say.
What’s clear, by contrast, is that to avoid cutting benefits in 2033 Congress will have to take action to bolster Social Security. Some lawmakers have proposed lifting the income cap on Social Security taxes. Currently, income over $168,600 isn’t subject to the payroll tax, which means that lower- and middle-income workers bear the brunt of funding the program.
Meanwhile, some Republicans have proposed hiking the U.S. retirement age to 70, arguing that Americans are living longer and so should retire later. But many workers are forced to retire far earlier than 70, often due to health issues or because their jobs are cut and they can’t find new work.
“Eliminating the shortfall is a means to an end, and the end is to provide economic security,” Altman said, noting that she and other experts would like to see the program not only shored up, but its benefits formula made more generous as well. “Most experts think the benefits are too low.”
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
A technology problem on Friday forced the Social Security Administration to close offices, while also hampering its ability to offer online services.
The government agency cited a “hardware issue” that it said is hampering its ability to provide services both in person and on its website. Reports of people being unable to access their My Social Security accounts surged starting Friday morning and continued into the afternoon, according to DownDetector.com.
SSA is experiencing IT difficulties today providing personalized services. For more information, visit: https://t.co/p07PcnWCwY.
The Social Security Administration said its offices are closed today to in-person services. The agency is continuing to answer general questions by telephone.
Mark Hinkle, press officer with the Social Security Administration, said in a statement Friday evening that the agency has resolved the tech glitch affecting personalized services. In-person services and full telephone support will resume on Monday, he noted.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
If you recently got an email from the Social Security Administration, don’t ignore it. Millions of people who created an online my Social Security account before September 18, 2021, will soon have to switch to a Login.gov account to be able to continue to access their information, according to the agency.
All users will soon need to have either a Login.gov or ID.me account to access their Social Security account and other online services, SSA said. More than 5 million account holders have already made the transition, part of an effort to simplify the process of signing in securely to access online services.
As of June, roughly 46 million out of the 86 million people with a my Social Security account will need to shift to a Login.gov account to continue access to their online services, SSA said.
“We have not set a final deadline for legacy accounts to transition to Login.gov accounts,” an agency spokesperson said.
The Social Security Administration hopes the new approach will help address lengthy wait times for callers to its 800 number, which in April averaged about 24 minutes, down from 42 minutes in November, according to the agency.
The “my Social Security” accounts are free and offer personalized tools regardless of whether they are receiving benefits. The service lets users apply for and manage benefits, as well as enable them to estimate future benefits and request replacement Social Security cards.
Social Security Commissioner Martin O’Malley touted the upgrade as “a safe and secure way for people to do business with” his agency. “We’re excited to transition to Login.gov to access our online services, streamlining the process and ease of use for the public across agencies.”
The agency encouraged my Social Security account holders to sign in, at which point they’ll be given an option to transition to Login.gov. Once their account is linked, a confirmation screen will appear, and they can access to their personal Social Security services or other tools.
Existing Login.gov or ID.me account holders do not need to create a new account or take any other action, according to the agency.
Each year, the Social Security Administration adjusts its benefits to account for inflation, providing an annual cost-of-living increase that’s meant to offset rising prices. This year, the program’s 67 million recipients may see their smallest boost since 2021.
The 2025 cost-of-living adjustment is projected to come in around 2.63%, the Senior Citizens League, an advocacy group for older Americans, said on Thursday. That figure is based on recent inflation data, with consumer prices in June rising 3%, the smallest increase since June 2023 and less than the 3.1% economists were forecasting.
If enacted, a 2.63% increase would represent a monthly payment increase of about $50, based on the current average monthly benefit of $1,907.
To be sure, official word on this year’s cost-of-living adjustment, or COLA, won’t come until October, when the Social Security Administration traditionally sets the next year’s benefit hike for beneficiaries. The first payment with the new COLA will show up in most recipients’ January benefit check.
While U.S. inflation is easing, many seniors aren’t feeling relief, the Senior Citizens League noted. Poverty among senior citizens has been on the rise in recent years, and almost half of people over 65 years old said they were having difficulty in paying their household bills, according to the most recent Census Household Pulse, which surveyed people from May 28 to June 24.
“Rising grocery prices is creating food insecurity for many retirees,” the Senior Citizens League said in its statement. “Feeding America estimated that 5.5 million Americans age 60 and above suffered from food insecurity in 2021, in the most recent study available on the subject, and that number is likely higher today.”
How Social Security sets its COLA
The Social Security Administration sets its annual COLA based on inflation during the third quarter, or from July through September. The agency takes the average inflation rate over that period from what’s known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks spending by working Americans.
If that inflation rate is higher than the same period a year earlier, the COLA is adjusted upwards by the difference.
But some advocacy groups and lawmakers have criticized the use of the CPI-W, given that older Americans spend differently than younger workers. For instance, the Senior Citizens League has noted that the CPI-W assumes workers spend about 7% of their income on health care, but older Americans can spend up to 16% or more on health costs.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
Boebert told Oren “Hank” McKnelly, an executive counselor for the SSA, that the agency was allowing “delinquent employees to sit on their sofas at home” instead of “actually getting to work and doing their jobs” as she took aim at telework policies during a House Oversight Committee hearing.
“This is absolutely unacceptable,” said Boebert, who is known for her bizarre behavior in – and outside of – Washington.
McKnelly, who was testifying before the committee, swiftly checked Boebert and broke down how SSA employees’ performances are monitored as they work from the office or at home.
“So real time understanding of what actions are being processed at any particular given time,” noted McKnelly, who added that employees are required to be “accessible” during work hours to supervisors, clients and colleagues.
Boebert pressed further on employee productivity before McKnelly shut the Republican down.
“Because we’ve been historically underfunded for a number of years now,” McKnelly replied.
“I don’t think you’re underfunded. You’re funded at the Nancy Pelosi levels, at the democrat levels. We just continued that same funding,” said Boebert, adding that it’s at “pandemic-level spending.”
“So I’d say we’d have an increase of over eight million beneficiaries over the last 10 years. At the same time, we experienced our lowest work staffing levels at the end of FY 22. That’s a math problem,” he replied.
“I mean, that is a problem. If you have those workloads increasing and you don’t have the staff to take care of those workloads, you’re going to have the backlogs that you’re talking about, representative.”
The simplest answer is yes: Social Security income is generally taxable at the federal level, though whether or not you have to pay taxes on your Social Security benefits depends on your income level. If you have other sources of retirement income, such as a 401(k) or a part-time job, then you should expect to pay income taxes on your Social Security benefits. If you rely exclusively on your Social Security checks, though, you probably won’t pay taxes on your benefits. State laws vary on taxing Social Security. Regardless, it’s a good idea to work with a financial advisor to help you understand how different sources of retirement income are taxed.
Is My Social Security Income Taxable?
According to the IRS, the quick way to see if you will pay taxes on your Social Security income is to take one half of your Social Security benefits and add that amount to all your other income, including tax-exempt interest. This number is known as your combined income (combined income = adjusted gross income (AGI) + nontaxable interest + half of your Social Security benefits).
If your combined income is above a certain limit (the IRS calls this limit the base amount), you will need to pay at least some tax.
The limit is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child. The limit for joint filers is $32,000. If you are married filing separately, you will likely have to pay taxes on your Social Security income.
Calculating Your Social Security Income Tax
If your Social Security income is taxable, the amount you pay in tax will depend on your total combined retirement income. However, you will never pay taxes on more than 85% of your Social Security income. If you file as an individual with a total income that’s less than $25,000, you won’t have to pay taxes on your Social Security benefits in 2021, according to the Social Security Administration.
For the 2021 tax year (which you will file in 2022), single filers with a combined income of $25,000 to $34,000 must pay income taxes on up to 50% of their Social Security benefits. If your combined income was more than $34,000, you will pay taxes on up to 85% of your Social Security benefits.
For married couples filing jointly, you will pay taxes on up to 50% of your Social Security income if you have a combined income of $32,000 to $44,000. If you have a combined income of more than $44,000, you can expect to pay taxes on up to 85% of your Social Security benefits.
If 50% of your benefits are subject to tax, the exact amount you include in your taxable income (meaning on your Form 1040) will be the lesser of either a) half of your annual Social Security benefits or b) half of the difference between your combined income and the IRS base amount.
Let’s look at an example. Say you’re a single filer who receives a monthly benefit of $1,543, which is the average benefit after the cost of living increase in January 2021. Your total annual benefits would be $18,516. Half of that would be $9,258. Then let’s say you have a combined income of $30,000. The difference between your combined income and your base amount (which is $25,000 for single filers) is $5,000. So the taxable amount that you would enter on your federal income tax form is $5,000, because it is lower than half of your annual Social Security benefit.
The example above is for someone who is paying taxes on 50% of his or her Social Security benefits. Things get more complicated if you’re paying taxes on 85% of your benefits. However, the IRS helps taxpayers by offering software and a worksheet to calculate Social Security tax liability.
If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
How to File Social Security Income on Your Federal Taxes
Once you calculate the amount of your taxable Social Security income, you will need to enter that amount on your income tax form. Luckily, this part is easy. First, find the total amount of your benefits. This will be in box 3 of your Form SSA-1099. Then, on Form 1040, you will write the total amount of your Social Security benefits on line 5a and the taxable amount on line 5b.
Note that if you are filing or amending a tax return for the 2017 tax year or earlier, you will need to file with either Form 1040-A or 1040. The 2017 1040-EZ did not allow you to report Social Security income.
Simplifying Your Social Security Taxes
During your working years, your employer probably withheld payroll taxes from your paycheck. If you make enough in retirement that you need to pay federal income tax, then you will also need to withhold taxes from your monthly income.
To withhold taxes from your Social Security benefits, you will need to fill out Form W-4V (Voluntary Withholding Request). The form only has only seven lines. You will need to enter your personal information and then choose how much to withhold from your benefits. The only withholding options are 7%, 10%, 12% or 22% of your monthly benefit. After you fill out the form, mail it to your closest Social Security Administration (SSA) office or drop it off in person.
If you prefer to pay more exact withholding payments, you can choose to file estimated tax payments instead of having the SSA withhold taxes. Estimated payments are tax payments that you make each quarter on income that an employer is not required to withhold tax from. So if you ever earned income from self-employment, you may already be familiar with estimated payments.
In general, it’s easier for retirees to have the SSA withhold taxes. Estimated taxes are a bit more complicated and will simply require you to do more work throughout the year. However, you should make the decision based on your personal situation. At any time you can also switch strategies by asking the the SSA to stop withholding taxes.
The Impact of Roth IRAs
If you’re concerned about your income tax burden in retirement, consider saving in a Roth IRA. With a Roth IRA, you save after-tax dollars. Because you pay taxes on the money before contributing it to your Roth IRA, you will not pay any taxes when you withdraw your contributions. You also do not have to withdraw the funds on any specific schedule after you retire. This differs from traditional IRAs and 401(k) plans, which require you to begin withdrawing money once you reach 72 years old, or 70.5 if you were born before July 1, 1949.
So, when you calculate your combined income for Social Security tax purposes, your withdrawals from a Roth IRA won’t count as part of that income. That could make a Roth IRA a great way to increase your retirement income without increasing your taxes in retirement.
Another thing to note is that many retirement plans allow individuals, aged 50 years or older, to make annual catch-up contributions. You can make catch-up contributions up to $1,000. These must be made by the due date of your tax return. You have until April 15, 2022 to make the $1,000 catch-up contribution apply to your 2021 Roth IRA contribution total.
State Taxes on Social Security Benefits
Everything we’ve discussed above is about your federal income taxes. Depending on where you live, you may also have to pay state income taxes.
There are 12 states that collect taxes on at least some Social Security income. Two of those states (Minnesota and Utah) follow the same taxation rules as the federal government. So if you live in one of those two states then you will pay the state’s regular income tax rates on all of your taxable benefits (that is, up to 85% of your benefits).
The other states also follow the federal rules but offer deductions or exemptions based on your age or income. So in those nine states, you likely won’t pay tax on the full taxable amount.
The other 38 states (plus Washington, D.C.) do not tax Social Security income.
State Taxes on Social Security Benefits
Taxed According to Federal Rules: Minnesota, Utah
Partially Taxed (Exemptions for Income and Age): Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Vermont, West Virginia
No State Tax on Social Security Benefits: Alabama, Alaska, Arizona, Arkansas, California, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming
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Bottom Line
We all want to pay as little in taxes as possible. That’s especially true in retirement, when most of us have a set amount of savings. But consider that if you have enough retirement income that you’re paying taxes on Social Security benefits, you’re probably in decent shape financially. It means you have income from other sources and you’re not entirely dependent on Social Security to meet living expenses.
You can also save on your taxes in retirement simply by having a plan. Help yourself get ready for retirement by working with a financial advisor to create a financial plan.
Tips for Saving on Taxes in Retirement
Financial advisors can offer valuable guidance and insight into retiree taxes. Finding a qualified financial advisor doesn’t have to be hard. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
What you pay in taxes during your retirement will depend on how retirement friendly your state is. So if you want to decrease tax bite, consider moving to a state with fewer taxes that affect retirees.
Another way to save in retirement is to downsize your home. Moving into a smaller home could lower your property taxes and it could also lower your other housing costs.
