Nota bene: 2012 is a critical year on the Baby Boomers' timeline. In 2012, the oldest boomers will turn 66, the magic age at which they can claim the whole enchilada of the Social Security benefits they have earned and, as an added topping, the penalty for working and collecting benefits goes away. Big news, right?
Maybe, maybe not.
While it's nice to be able to start tapping into the system you have paid into lo these many years, and the fact that Social Security recipients got a whopping 3.6 percent raise for 2012 (the first since 2009) may make that first check a bit sweeter, here's the big "but" coming: About 10 million workers will be paying higher Social Security taxes in 2012 to afford the country's largess.
The ceiling amount of a worker's earnings that are subject to Social Security tax will increase in 2012 to $110,000, up from $106,800 this year. And the temporary reduction that nipped what workers paid at 4.2 percent of their wages ends in this calendar year and returns back to 6.2 percent of their wages in 2012.
Yeah, I hate numbers too and my eyes were glazing over right along with yours in that last paragraph. But here's why you should be paying attention: More people are going to be collecting bigger Social Security checks starting now and more people are going to be taxed more heavily to pay for it.
I'm not taking sides here -- my Momma raised no fool -- but I did want to impart some helpful, if obvious, things to think about if you're one of those new-to-collect people.
1. You can increase what you will get monthly if you delay claiming your benefits until you are 70. If you can afford it, it makes more financial sense to postpone your claim and get fatter checks later -- especially if you are healthy and plan on living a good long while.
2. Double-dipping is allowed. If you've been married for at least 10 years, you are eligible for Social Security payments based on your own work record or up to half of your spouse's earned benefit -- whichever is higher. And you may not have to choose. A 66-year-old retiree can sign up to get spousal payments and delay his/her own retirement benefits until up to age 70 -- at which point they will be higher. See point 1.
3. Work, work, work. If you stay on the job and claim Social Security payments before you are 66, part or all of your Social Security benefit is withheld. If you earn more than $14,640 in 2012, you will lose 50-cents on each dollar above that amount from your Social Security check if you are younger than 66. The earnings limit disappears on your 66th birthday and you get the full amount of your check. A much sweeter deal since few can afford to quit work, assuming they still have jobs to quit.
You can estimate your Social Security benefits here.