social security

2024 Section 179 Deduction Limits for Small Businesses Taxes

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Small business tax deductions are important in order to offset high business taxes levied against small business owners and entrepreneurs. This is especially true for work from home entrepreneurs who file as sole proprietors, or as a Limited Liability Company aka LLC, with sole proprietor tax status. Small business owners can get hit with high tax bills thanks to Self-Employment Taxes. Self-employment tax, or SE Tax, is so high because it includes taxes that would usually be paid by the employer. In a typical employer-employee scenario, the employee pays 6.2% in Social Security Taxes. The employer withholds this amount from the employee’s paycheck. What many people don’t realize is that the employer also pays 6.2% in social security tax for the employee. A small business owner that files as a sole proprietor is on the hook for the whole amount! The self-employment tax rate – sometimes called the SE tax rate – is 15.3%, which is 12.4% for social security taxes plus another 2.9% for Medicare taxes. That 15.3% is on top of regular Federal Income Taxes. A successful small business owner in the 30% tax bracket, pays a blood curdling 45% tax rate. And that is before adding Medicare …

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Colorado PERA Good or Bad The Truth

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As a former financial planner in Colorado, I get a lot of questions about Colorado’s PERA program and is PERA a good retirement plan. For those of you who are not from Colorado, PERA stands for Public Employment Retirement Association. It is a public pension plan for employees of the State of Colorado and public-school teachers, similar to CalPERS, the public pension plan for California. Most Colorado PERA jobs are with state and local governments, as well as many teachers in Colorado. Recently, PERA has taken some lumps in the media. For whatever reason, Republicans hate PERA, even though it is a version of exactly what they want to do by reforming Social Security to be based on investing in the markets. Sometimes, these criticisms are valid, and sometimes they are not. What is true is that PERA is not just another ordinary pension plan, and to really understand it requires delving into those details. PERA and Social Security The most important thing to understand about PERA is that it replaces Social Security. You know how people are always saying that Social Security would be better off if it invested worker’s contributions in the stock market? That is exactly what …

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How Much Social Security Will I Get?

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social security amount

How Much Will Your Social Security check be? Social Security is a program of the federal government that provides retirement income for Americans older than 62 years old. The program also offers benefits for those who are disabled. The amount of Social Security you get depends on several factors, but most importantly, your age when you choose to start taking Social Security, and your income while working. I want a better idea than that. I want to know how much Social Security will I get when I retire. Fortunately, there is an easy way to find out. Qualifying for Social Security As a government program, there are a million exceptions to every rule, but in general, in order to qualify for a Social Security benefit, you must have 40 work credits. You earn a credit for each quarter you have wages or self-employment income on which you pay Social Security taxes. So, if you have been working for a state government that opts out of Social Security like Colorado does with its PERA pension program, or California does with its CALPERS, then your income doesn’t earn you credits. You can earn up to four credits each year, and you need …

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Social Security Checks Increase 2023

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social security checks

Fortunately for retirees depending on Social Security, payments on Social Security checks 2023 will be quite a bit higher than the payments on 2022 Social Security checks. New Social Security Payment Amount 2023 The 2023 Social Security payment amount hasn’t been officially released yet, but some groups are expecting a 10 percent or more increase for Social Security retirees in 2023 thanks to high inflation in 2022. Although some financial groups are expecting an even higher increase. If inflation remains the same as in June, then the COLA for Social Security would be around 9 percent. Social Security COLA Increase COLA stands for cost of living. Social Security payments are adjusted each year to keep up with inflation. For the last few years, Social Security check amounts had been relatively flat thanks to low inflation until 2022. 2022 Social Security checks were increased by a COLA of 5.9 percent. However, inflation has been even higher during the first half of 2023. The Fed has been trying to combat inflation by aggressively raising interest rates. If the Fed’s gambit works, inflation could be lower by year end. Whether that would translate through to the 2023 Social Security check calculations remains to …

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Big Social Security Raise Coming

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social security card cola increase

I did not see that coming. Well, I knew that there was enough inflation washing around in the US economy that retirees would see an increase in there Social Security payments for 2022. I did not know it would be this big. Social Security COLA Increase Is a Big One If you’re new to collecting Social Security, or if you are just new to following along, Social Security offers a fixed monthly payment to US retirees based upon a combination of how many years they worked, what their salary was while working, and at what age they started taking Social Security benefits. Once this number is set, it is never recalculated. However, each year, all Social Security recipients get a Cost of Living Adjustment or COLA that ensures the benefit’s value stays steady with inflation, a mistake made with the minimum wage that they did not want to repeat. Check out my SoFi review The COLA is calculated by the Social Security Administration based upon inflation statistics for the prior year. In the last few years, the COLA increases have been moderate, less than 2% in most cases. This year, the calculation occurs as higher food and energy prices have …

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Financial Independence Made Simple

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financial independence freedom

Financial independence is both easier and harder to achieve than most people think. Financial independence is simple if you follow the standard, time-tested formula of long-term saving and investing. But no one wants to do that. They want financial independence faster and easier, and that is much harder to achieve than most people think. What Is Financial Independence? The definition of financial independence is when work becomes optional, and you do not depend on anyone else for any income or help with expenses. In other words, when your finances are completely under your control. If you want to keep working, go ahead. If you want to earn money on the side, do you. When you are financially independent you make the choices without regard to your finances. Sound impossible? It is actually quite simple. Easy Financial Independence Achieving financial independence is easy and simple… in exactly the same way as losing weight is easy and simple. Just eat less calories than you burn over a long enough period of time. Financial independence is no different. Just spend less money than you earn over a long enough period of time. You have heard this song a thousand times, and it is …

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Social Security Increase For 2021

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social security cola

Every year Social Security payments are adjusted for inflation. That means that in most years, there is an increase in the monthly benefit paid to people collecting Social Security. This year, retirees can expect a small increase. Social Security COLA for 2021 The Cost-of-Living Adjustment, or COLA, is calculated using an inflation index called the consumer price index, or CPI. The adjustment for the following year is set in October so that there is enough time to get everything processed. (It probably doesn’t take that long anymore, but the law says October, so that’s the way it goes.) Of course, in order to calculate the CPI, you have to have the whole month of data, so the best they can do in October is use the September number, which came out showing negative inflation. Social Security is never cut by COLA, so instead, it will stay the same for the following year. The increase from 2020 to 2021 was will be 1.3 percent. Income Cutoff for Paying Social Security 2021 The same index is used to determine how much income a current wage earner must pay for Social Security tax, sometimes called FICA on paystubs. Since the COLA adjustment for benefits …

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When Should I Start Taking Social Security

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Deciding whether to start taking Social Security now, or waiting until later is a complicated decision, or at least it frequently gets made out that way. If you want to read all of the nitty-gritty details about Social Security benefits, there is a lot of great information available directly from the Social Security Administration online at www.ssa.gov. Despite what you think, the information there is just as easy to read and understand as what you will find anywhere else. They even have Benefit Estimator if you want to get a rough idea of what your benefit might look like. If you sign up for a mySSA account, you can get pretty exact details, if you are close to retirement age. (If you have several years to go until retirement, any data will be an estimate because the amount of your future earnings can affect what your actual benefit is.) Social Security Benefit Full Retirement Age or Early These days, Congress has tinkered around with how and when Social Security benefits are paid in order to prop up the system. The first thing you need to know is when your “full” retirement age is. The scale is based upon when you …

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Medicare While Still Employed

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Everyone knows that Medicare provides heath care coverage for retired Americans over 65 years old. But, with more American’s working beyond age 65, there is plenty of confusion about how Medicare works if you are still employed and working at a job, especially if it provides health insurance. Medicare is a health care program for American workers age 65 and older. Although it is often paired with Social Security, the programs are different. In fact, with modifications to the Social Security retirement age moving back full retirement benefits, there is now an age disconnect between the two programs. This can cause a financial issue if you aren’t thinking about Medicare when you turn 65 because you are still working a job and don’t need Medicare insurance because you have coverage at work. Medicare Late Enrollment Penalty Does it make sense to enroll in Medicare if you are still working when you turn 65? When you turn 65, you must enroll in Medicare during your initial enrollment period to avoid paying a penalty when you enroll later. The penalty for late enrollment in Part A is an increase in your monthly premium of up to 10% for twice as many years …

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Zombie Social Security Numbers

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According to a recent CNN article, the Social Security Office still has active (that is, not official deceased) numbers and records for 6.5 million Americans age 112 or older. There are only 35 total people living worldwide who are that age. The problem? These, so called, zombie social security numbers could be used, along with a fake birth certificate (or a lot of makeup) to create fraudulent IDs, credit cards, bank accounts, you name it. And, since the numbers are active, but not being used, no one will even be around to complain that accounts are being opened in their name. The truly funny part about this is that the fix is so difficult, brought to you by the people who do bureaucracy best. If you aren’t a government employee, the (partial) fix is as easy as writing a small computer program. There are apparently 12 people that age still actively drawing Social Security benefits. If the total number of 112-year olds is even remotely accurate, than less than 20 people world-wide could still be alive, and counting on having that valid Social Security number. In other words, expiring every one of the 6.5 million numbers (except the 12 still …

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