Dear Editor:
As the new year begins it is probably a good time to review some of the annual Social Security and Medicare changes that become effective in January 2004.
Most of the changes affect people already getting Social Security and Supplemental Security Income (SSI) benefits. But a few affect people who work and pay Social Security taxes.
Beginning this month, Social Security and SSI benefits went up 2.1 percent. That means the average Social Security retirement benefit rose from $903 in 2003 to $922 in 2004. Of course, the increase applies to all Social Security benefits, not just retirement payments. For example, the average disability check climbs from $844 in 2003 to $862 in 2004. And the average benefit payable to a widow(er) goes up $18, from a 2003 rate of $870 to $888 in 2004.
The basic SSI payment rate for an individual rises from $552 to $564. The rate for a couple goes from $829 to $846. But please note that these figures represent just the federal portion of the SSI payment. Many states supplement that federal rate with their own payment, which also generally goes up annually with cost-of-living raises.
People getting Social Security benefits who are under full retirement age, not disabled, and still working also have updates to take into consideration. The earnings threshold in 2004 is $11,640. For every $2 earned over that limit $1 must be withheld from any Social Security benefits due. (The 2003 threshold was $11,520.)
If you are reaching full retirement age in 2004, you have a higher income threshold. It is $31,080, compared to $30,720 last year. For every $3 you earn over $31,080, we must take $1 from any benefits you are due, for those months leading up to your full retirement age. And when you reach that age, this earnings limit expires.
And an important message for Medicare beneficiaries in that Part B premium goes up to $66.60 this year. It was $57.80 in 2003.
As I mentioned earlier, some of the annual updates affect people still working and paying Social Security taxes. The major change affects higher-income workers, those making more than $87,000. In 2003, once they made that much money, they no longer owed Social Security payroll taxes. In 2004, the taxable earnings base rises to $87,900. The tax rate itself does not change. It remains at 6.2 percent for wage earners and 12.4 percent for self-employed people. The Medicare tax rate also remains the same as last year. It is 1.45 percent for wage earners and 2.9 percent for the self-employed. But there is no earnings base for Medicare taxes. In other words, all of your wages or self-employment income is subject to the Medicare tax.
One other change affects those still working and earning Social Security credits. The amount of income required to earn one credit increased from $890 in 2003 to $900 in 2004. But the maximum Social Security credits that can be earned in any one year remains at four. In other words, once you make $3,600 this year, you will have earned the maximum four credits for Social Security purposes. Most people need 40 credits to be eligible for Social Security retirement benefits. (Fewer credits are sometimes needed for other Social Security benefits.)
Richard Thayer
Social Security Manager, Jersey City