Six Social Security Changes Taking Place This Year

Six Social Security Changes Taking Place This Year

The good news for retirees is that they can expect more benefits this year from the Social Security Administration (SSA). The bad news is that the retirement age and earnings to which the Social Security tax applies will also increase.

The SSA has announced the following changes for 2018:

1. Benefits increased by 2%.

To offset the impact of inflation, Social Security beneficiaries periodically receive a cost-of-living adjustment (COLA). The COLA, which is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), is calculated by the U.S. Bureau of Labor Statistics (BLS) and is meant to ensure that the buying power of beneficiaries remains constant.

This year’s 2% increase in benefits is the largest since 2012, when the COLA increased benefits by 3.6%. In contrast, the 2017 increase was only 0.3%.

The average monthly payout will increase, though, by just $27 – from $1,377 a month in 2017 to $1,404 in 2018.

2. More earnings are subject to the Social Security tax.

Employees paid the 6.2% Social Security tax on up to $127,200 of their earnings in 2017. This year, the tax will apply to the first $128,700 of a person’s earnings.

3. The maximum benefit has increased.

While about 12 million Americans will be paying more in Social Security taxes, maximum benefits are calculated based on the amount of earnings being taxed. As a result, the maximum monthly benefit has increased from $2,687 in 2017 to $2,788 in 2018.

4. The age of eligibility for full benefits has increased.

The age at which a person is eligible for full Social Security benefits will increase by two months a year until it reaches 67.

Those who turn 62 in 2018 will be eligible for full retirement benefits at age 66 and four months. Those who turned 62 in 2017 will become eligible for full benefits at age 66 and two months.

The earliest age at which a person can claim Social Security retirement benefits is still 62. However, those who begin taking benefits before their full retirement age will enjoy benefits for more years, but the amount they receive will permanently be lower than if they had waited until the age of full eligibility.

Conversely, those who delay collecting Social Security benefits until well after their age of full eligibility can collect significantly more. A person who delays collecting Social Security payments until age 70, for example, will be eligible for a 76% higher annual payout than a person who started receiving benefits at 62.

Of course, the 70 year old will end up with eight fewer years of benefits by waiting.

5. Earnings limits will increase.

All or part of a person’s Social Security benefits may be withheld when a person is working, depending on how much is earned and whether the person has reached the age of eligibility for full benefits. Once a person reaches the age of eligibility, he or she can continue working and no benefits will be withheld.

For 2018, beneficiaries who have not yet reached the age of eligibility can earn up to $17,040 without affecting their benefits. That’s an increase of $120 from the 2017 limit of $16,920. Anyone earning more than the limit will have $1 deducted from their payment for every $2 that exceeds the limit.

Anyone who reaches the age of eligibility in 2018 can earn up to $45,360 without being affected. That’s an increase of $480 from 2017’s limit of $44,880. For every $3 earned over the 2018 limit, Social Security benefits will be reduced by $1 until the person reaches the age of eligibility.

6. Maximum benefits for Social Security disability have increased.

Maximum benefits for the 10 million Americans who qualify for Social Security disability payments have increased slightly. Those who are legally blind will receive an increase of $20 a month, for a maximum of $1,970 a month. Others who qualify for disability payments will receive an extra $10 a month for a maximum benefit of $1,180.

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