Retirement
benefits typically increase with inflation. This year is expected to be
different from most years due to a decline in the consumer price index. Here
are some trends you can expect with retirement benefits in 2010:
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Government payouts and tax incentives to save for retirement will generally
stay the same. However, out-of-pocket retiree health costs, especially for
prescription drugs, will continue to gradually increase.
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No increase in Social Security. Monthly Social Security checks for most
recipients will not increase in 2010. Retirement payouts are tied to the
consumer price index for urban wage earners and clerical workers, which fell
between the third quarter of 2008 and third quarter of 2009. 2010 will be the
first year without a Social Security increase since cost-of-living adjustments
went into effect in 1975. The maximum amount of earnings subject to the Social
Security tax will also remain the same at $106,800.
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Larger Medicare Part D premiums and out-of-pocket costs. The average monthly
Part D premium will go up by 11 percent this year if recipients stay in their
current plans. About 61 percent of drug plans will charge a deductible in 2010,
and 80 percent will have a coverage gap in which recipients must pay 100
percent of their drug costs, up from 45 percent and 75 percent.
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401(k) contribution limits will not change. The maximum amount will remain
$16,500. Those who are age 50 and older will be able to make an additional
contribution of $5,500 this year, which is also unchanged from 2009. Workers
with a retirement plan who earn less than $66,000 annually can contribute up to
$5,000 to a traditional or Roth IRA, and workers age 50 and over can contribute
up to $6,000. The income limits do not apply to couples who do not have a
401(k) through their employers.
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Pension insurance limits will not change. The federal government insures most
private-sector pensions up to certain limits. The maximum insured pension is
higher for workers who delay retirement and lower for those who retire early.
Annual maximums are reduced for workers who choose survivor’s benefits for a
spouse.
The typical changes that occur from year to year with retirement benefits are
less standard this year. Even though this is the case, you can expect
government payouts and tax incentives for retirement to generally remain the
same.
