The Congressional Budget Office (CBO) is projecting that for the first time since 1975, when cost-of-living adjustments (COLA) were first payable, Social Security beneficiaries will not receive an automatic increase next year (or for 2011), due to low inflation.

 

According to the CBO, the absence of COLA will also affect the maximum earnings that are taxable for Social Security, because under the Social Security Act, the earnings maximum can only increase when COLA is payable. Therefore, the CBO is projecting that this year's earnings base of $106,800 will remain the same for the next two years.

 

Medicare beneficiaries will be affected too. By law, for individuals who have their Medicare Part B premiums withheld from their Social Security checks, premiums cannot rise more than COLA increases for Social Security. Consequently, no annual COLA means that standard Medicare premiums will remain at their current level of $96.40 per month for approximately 75% of Medicare beneficiaries. However, certain beneficiaries (those who do not have their premiums deducted directly from Social Security and those with higher incomes who pay higher income-related premiums) do not have this protection, and will see their premiums rise, perhaps substantially.

• The Social Security Administration estimates that a 20-year-old worker has a 3 in 10 chance of becoming disabled before reaching retirement age. (Social Security Disability Benefits, SSA Publication Number 05-10029, November 2008) There were more than 7 million disabled workers in 2008 receiving Social Security disability benefits. (Fact Sheet On The Old-Age, Survivors And Disability Insurance Program, Social Security Administration, July 2, 2008)

How do you know if you need disability insurance?

If you're like many folks right now, you may be trying to determine if having a stay-at-home spouse go back to work would be beneficial to your financial situation.  The answer is not always clear-cut, so you want to make sure you do the math. A second-income analysis involves an evaluation of the net after-tax benefit derived from a second income. For some couples, a second income is a financial necessity. For others, it is simply a means of achieving specific financial goals, such as ensuring a comfortable retirement.

There are two situations in particular that warrant a second-income analysis: (1) when a nonworking spouse considers entering the workforce, and (2) when a retired person considers full- or part-time employment to supplement Social Security and other retirement income.

If you wish to determine whether a second household income is advisable, you need to consider personal ramifications as well as the financial and tax aspects of your decision.

 

How will time spent away from the home impact you, your relationship with your spouse, and your children (if any)? For instance, if an at-home spouse with children is thinking about entering the workforce, the impact of such a move on the children may be a primary concern. In some cases, the economic benefit provided by a second income may not justify the loss in family or personal time. In other cases, of course, personal preference must take a back seat to financial necessity.

Clearly, a second income can offer financial benefits. These advantages include: additional wages, salary, or self-employment income brought into the household, as well as additional fringe benefits (if any). You'll want to look closely at the potential for saving additional income toward retirement and whether one spouse's employer-provided health plan is more comprehensive than another.

There is also a financial downside to a second household income. Financial costs include possible extra expenses for commuting, parking, meals, clothing, child care, housecleaning, and dry cleaning.

A second income could trigger certain unanticipated tax consequences, resulting in more or less after-tax income than you may have expected. Therefore, you must evaluate the overall tax impact of the second income, particularly if you're collecting Social Security benefits.  For more on tax considerations, please visit www.KeenerFinancial.com.

I'll be speaking to the Southlake Chamber of Commerce WIN (Women in Networking) meeting at noon on Wednesday, August 26. 

 Women have unique opportunities and challenges with money!  Women tend to live longer and earn less than men, but according to some recent studies may actually be better investors.

This interactive quiz will engage you in thinking about some of the biggest financial opportunities in your life and raise your antennae on some of the pitfalls to avoid.   We'll also discuss one of the biggest challenge Moms face - balancing saving for retirement and college.

 
Come prepared to have fun and participate - guessing at answers even if you don't them will be encouraged!  And after we throw out all the crazy answers, we'll make sure everyone knows the right answer so you walk out the door with solid information to make smart financial decisions.

Where: Southlake Chamber of Commerce (1501 Corporate Circle, Suite 100, Southlake)
When: Wednesday, August 26, noon

Limited Space.  Reservations Recommended.   Visit www.SouthlakeChamber.com to reserve your seat.