The Social Security Administration releases its annual changes for the Social Security program every October. This year, as with every year, changes go into effect on January 1st, 2018. Those who rely on social security for living, or just want to keep track of how the changes will affect them in the future, can expect to see five significant changes.
The annual change in payments will increase by 2% for Social Security beneficiaries.
As we enter 2018, sixty-six million Social Security beneficiaries will benefit from the cost-of-living adjustment. This year’s COLA will see a 2% increase. The cost-of-living adjustment is created to counteract the effects of inflation on the economy. Social Security beneficiaries can expect their checks to have consistent buying power year to year. To be sure this happens every year, the Bureau of Labor Statistics calculates the Consumer Price Index for Urban Wage Earners and Clerical Workers. These calculations effect whether an increase will take place and what percentage that increase will be.
This year’s COLA increase is the largest bump we have seen since 2012. It is significant to last years increase of 0.3%. Although 2% seems like a big bump from 2017, the average Social Security check will only see a $27 per month increase.
Maximum taxable earnings for workers will increase to $128,700
Every pay period, employees are required to pay a tax on their income called the Social Security tax. In 2017, the 6.2% tax was on income up to $127,200. Any income above this amount were not taxed. The 6.2% tax rate on income will remain the same, although the tax cap will see an increase. Instead of $127,200, taxable income will be up to $128,700. Although this may seem like a downfall, as the taxable maximum increase, so does the maximum Social Security benefits for retirees.
Full retirement age continues to increase
Currently, the earliest age a person must be to claim Social Security retirement benefits is sixty-two. While you can claim benefits at the age of sixty-two, claiming benefits before your full retirement age will result in a permanent reduction in your Social Security benefit payout. This year, the full retirement age will increase by two months, requiring beneficiaries to be sixty-six and four months before they can collect their full benefit. This increase of two months per year is expected to continue until the full retirement age hits sixty-seven. A good point to note is that collecting your Social Security benefit after full retirement age can result in benefits higher than your full payout.
Earning limits increase
Some beneficiaries choose to collect Social Security benefits while they are still working. For these beneficiaries, a portion, or sometimes all, of their payouts can be withheld temporarily. The income limits for withholding benefits will increase in 2018. In 2018, beneficiaries will be able to earn up to $17,040 in additional income compared to the $19,920 limit of 2017.
Disability thresholds will increase
Currently, around ten million Americans qualify for Social Security disability benefits. The thresholds of these benefits will increase slightly this year, allowing the legally blind to collect twenty dollars more a month and non-blind to receive ten dollars more a month.
While the change in Social Security benefits may seem slight, it’s important that your investments reflect those changes. Talk to your comprehensive portfolio management team to determine whether these changes will negatively affect your income, or be a reason to change your investment portfolio.