For 2018, Social Security is similar in terms of how workers are taxed and how benefits are totaled up and paid. But, there are a few changes that you need to be aware of, including the gradually increasing retirement age as well as several other thresholds. Here are 8 changes to Social Security that you need to know in 2018.
1. The Retirement Age is Increasing for Some Eligible Seniors
The full retirement age for Social Security benefits has been 66 years of age for a while now, but it will gradually increase to 67 for Americans born after 1960. For those born 1954 or earlier the full retirement is still 66 years old. But, if you were born during the following 6 years it will be between 2-10 months more.
2. Cost-of-Living Adjustment for Retirees
The Social Security Administration has finally announced a 2% cost-of-living adjustment (COLA), for beneficiaries. Increased payments already began during December 2017. This is the highest COLA in six years thanks to inflation – though the rise is still historically low. Social Security COLAs average at about 3.8%, and have done so since 1975.
3. Higher Payments for Beneficiaries
According to an estimate by the SSA, the average retired worker will receive an extra $27, which will raise their benefit to $1,404. Couples who receive a combined payment can expect an extra $46 which will bring their payment to $2,340.
In addition to this, the maximum benefit is also increasing. The highest payable benefit for a worker retiring at full retirement age will rise by more than $100. This will bring the monthly total to $2,788 per month in 2018.
4. A Slightly Higher Taxable Earnings Cap
Every year there is a maximum wage amount that is subject to Social Security tax. Last year’s maximum was set at $127,200, so any income earned over this threshold was not taxable for Social Security. But, for 2018, the maximum will increase by $1,500 to $128,700. This means that those who earn a higher income will now pay more Social Security tax than they did in 2017.
5. Disability Thresholds are Rising
More than 10 million American claim disability benefits from Social Security. This year, the maximum incomes that people can earn while claiming this benefit have risen slightly. For non-blind claimers, the 2018 threshold has raised by $10 to $1,180. For blind claimers, the threshold has risen by $20 to $1,970.
6. SSI Thresholds are Rising
There are currently two Social Security disability programs, Social Security Disability Income (SSDI) and Supplemental Security Income (SSI). Similar to retirement benefits, SSDI payments are calculated from the beneficiary’s work record. However, SSI payments are based on a set amount. For 2018, the threshold is increasing slightly. For single claimants, SSI is rising from $735 to $750, and for couples $1,103 to $1,125.
7. The Earnings Test Limits are Going Up
If you start claiming retirement benefits before you reach the full retirement age, and you still work, your salary could potentially reduce the amount of Social Security you receive. This is called the Social Security earnings test, and there are two different versions of it, depending on your age.
- If you’ll reach full retirement age after 2018, $17,040 of your salary (that’s $1,420 per month) will be excluded from consideration. After this threshold, your Social Security benefits will reduce by $1 for every $2 in extra earnings.
- If you’ll reach full retirement age during 2018, $45,360 of your annual salary (that’s $3,780 per month) will be excluded from consideration. After this threshold, your Social Security benefits will reduce by $1 for every $2 in extra earnings.
If a portion of your benefit is withheld because of the earnings test, don’t worry as your benefit could permanently increase once you reach full retirement age.
8. Social Security ‘Credits’ Represent More Earnings
The last change to Social Security for 2018, is the “credits” workers need to earn to qualify for benefits. In order to be allegeable for retirement benefits when you come of age, you’ll need to earn 40 Social Security credits throughout your working life. Workers can earn a maximum of 4 per year. For 2018, one credit represents $1,320 of earnings, so you’ll need to bring in at least $5,280 per year to earn all four yearly credits.