Legal News Alert #105

Social Security Changes for 2004

Taxable Wage Base Increased

The Social Security wage base for 2004 is $87,900, up from $87,000 in 2003. Beginning January 1, 2004, employers must withhold Social Security taxes (6.2 percent) from employees' wages up to $87,900. This amounts to an additional $489.80 in 2004 for employees who earned $87,900 or more in 2003 and 2004.

Medicare Tax Remains the Same

The Medicare tax for 2004 remains the same as it was for 2003 at 1.45%. And as with 2003, all earned income regardless of the amount is subject to this tax.

Employers Must Match

As in 2003, employers must match the Social Security and Medicare tax payments withheld from employees wages.

Maximum Earned Credits Remain the Same

As in 2003, employees earn in 2004 one Social Security credit for each $900 of earnings up to a maximum of four credits per year.

Full Benefit Retirement Age Raised

The full benefit retirement age for those retiring in 2004 is 65 years and 4 months. The full retirement age is increasing in gradual steps until it reaches the age of 67. This change began in 2003 and affects all those born in 1938 or later.

Delaying Receipt of Benefits Means a Greater Benefit Later

If employees reach full retirement age and choose not to receive benefits right away, it could mean a higher benefit later and an increase in the future benefits for their families and survivors. Contact your local Social Security office for details or go to www.MichiganAttorney.com and click on legal links to get to the Social Security website.

Reduction in Benefits Applies to Early Retirees, but Not to Full Age Retirees

When employees reach full retirement age, they can earn all they want and still receive unreduced full Social Security benefits. However, if employees are less than full retirement age when they begin to receive benefits, they can earn more in 2004 without their benefits being reduced. Social Security beneficiaries who have not reached full retirement age can earn up to $11,640 before his or her benefits are reduced. For every $2 a person earns over $11,640, before the year of his or her full retirement age, $1 is withheld from benefits.

In the year an employee reaches full retirement age, $1 in benefits is deducted for each $3 earned above $31,080 until the month the employee reaches full retirement age. And as stated above, benefits are not reduced once the employee reaches full retirement age regardless of the amount earned.

NICHOLS & EBERTH, P.C.
22374 Garrison, Dearborn, MI 48124

Free Initial Consultation

Call Dearborn office at (313) 561-5700 or
Call Birmingham, Northville, Troy office at (248) 952-1700 or
Call us toll free at 888-571-5700 or
Send us an email at email@michiganattorney.com