So in early October of 2017, Social Security Administration has announced some new changes to their annual program effective January 1, 2018.
1. Social Security beneficiaries will see a 2% increase in payments
For 2018, 66 million Social Security beneficiaries will see a 2% cost-of-living adjustment (COLA). This increase is meant to counteract the effect of inflation. The Bureau of Labor Statistics (BLS) calculates the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), and this calculation ensures that a person’s Social Security check has the same buying power that it did the previous year. If the CPI-W increases more than 0.1% year over year between the third quarter of the previous year and the third quarter of the current year, Social Security well raise beneficiaries’ checks by the same amount.
What is the ‘Bureau of Labor Statistics – BLS’
The Bureau of Labor Statistics is federal agency that produces a range economic data which reflect the state of the U.S. economy. They are an arm of the U.S. Department of Labor and its primary purpose is to research, assemble and publish a range of statistical data on the labor market, prices, and productiviy.
Some of their Major Data Releases include:
- The Consumer Price Index
- The Producer Price Index
- The Local Area Unemployment Statistics
- The National Compensation Survey
- The Household Survey
The 2% bump in 2018 marks the largest COLA increase since 2012 when benefits increase 3.6%
2. Maximum taxable earnings will increase to $128,700
In 2017, employees were twisted to pay 6.2% Social Security tax with their employees matching on earnings up to 127,200. Any earnings above that were not subject to tax. In 2018, the tax rate will remain the same, but the tax cap will increase to $128.700.
The flip side of this is that as the taxable maximum increases, so does the maximum amount of earnings used by the SSA to calculate retirement benefits. In 2017, the maximum monthly Social Security benefit for a worker retiring at full retirement age was $2,687. In 2018, the maximum benefit will increase $101 per month to $2,788.
3. Full retirement age will continue to increase
The absolute earliest a person can start claiming Social Security retirement benefits is 62. However, claiming before your full (or normal) retirement age will result in the payout being permanently reduced. For those who turned 62 in 2017, the full retirement age is 66 and two months. But for those who turn 62 in 2018, the full retirement age will increase to 66 and four months. The full retirement age is set to increase by two months each year until it hits 67. So, for anyone born in 1960 or later, the full retirement age will be 67.
Those who delay collecting Social Security past their full retirement age can actually collect more than their full payout. In fact, someone who put off claiming until age 70 would receive a 76% higher annual payout than a person who started receiving benefits at 62.
4. Earnings limits will increase
Those who work while collecting Social Security benefits usually find all or part of their payouts can be temporarily withheld, depending on how much they earn. However, those income limits will increase slightly in 2018.
Prior to reaching the full retirement age, beneficiaries will be able to earn up to $17,040 in 2018. After that, $1 will be deducted from their payment for every $2 that exceeds the limit. The 2018 annual limit marks a $120 increase over 2017’s limit of $16,920. Anyone reaching their full retirement age in 2018 will be able to earn $45,360, up $480 from 2017’s $44,880 annual limit. For every $3 earned over the 2018 limit, Social Security benefits will be reduced by $1, but it will only apply to money earned in the months prior to hitting the full retirement age. Once a person hits the full retirement age, no benefits will be withheld if they continue working.
5. Social Security disability thresholds will increase
About 10 million Americans qualify for Social Security disability payments, and those thresholds are also increasing slightly in 2018. The legally blind will receive a maximum of $1,970 a month, an increase of $20 a month over 2017. For the non-blind, the maximum benefit will increase $10 a month to $1,180.
- The Consumer Price Index (CPI): an aggregate of the prices of a relatively fixed basket of goods, which is used as a standard gauge of inflation and the cost of living.
- The Producer Price Index (PPI): a measure of the average prices American producers receive for their goods and services.
- Local Area Unemployment Statistics (LAUS): a range of localized data about labor efficiency and unemployment.
- The National Compensation Survey (NCS): comprehensive aggregates of workers earnings across a variety of sectors.
- The “Household” Survey: also known as a Current Population Survey (CPS), this monthly survey of the American population includes the national unemployment rate.
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