Five Changes to Social Security in 2018

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With Social Security being one of the largest assets available to most American couples, any changes are important ones. Below, we will cover some of the upcoming changes to Social Security in the year ahead.

Seniors Will Get (Slightly) More

One of the most widely-followed decisions by the Social Security Administration each year is what the cost of living adjustment (COLA) will be in the coming year.

This is an increase paid to seniors which is intended to help them keep pace with rising inflation.

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In recent years (2009, 2010, and 2016) there have been no COLA increases because inflation has remained flat, however, for 2018 Social Security recipients can expect an increase of 2.00%.

On average, this should amount to roughly an extra $27 in 2018 for the typical retiree.

High Earners Are Going to Pay More

The SSA sets a payroll tax earnings cap each year that dictates what earned income is subject to the 12.4% tax that funds Social Security.

In 2017, earned income up to $127,200 was subject to the payroll tax, with earned income above this amount not taxable.

This means that roughly 9 in 10 Americans are paying this 12.4% tax on every dollar they earn, whereas the wealthy are paying tax on a much-smaller percentage of their earned income.

In 2018, this payroll tax cap however is increasing to $128,400 from $127,200.

If you’re employed by someone else this will cost you an extra $74 per year. If you’re self-employed, it will cost you an extra $148 per year because you’re responsible for both the employer and employee’s portions of the payroll tax.

The Maximum Monthly Benefit Will Increase

For 2017, the maximum monthly benefit for workers at Full Retirement Age has been $2,687 assuming that they contributed at the maximum payroll tax cap throughout their careers. In 2018, this maximum will rise to $2,788 per month.

The Full Retirement Age Will Continue to Increase for New Retirees

For anyone born between 1943 and 1954, their Full Retirement Age is 66. However, for 2018, those born in 1956 begin to reach 62 and will become qualified for Social Security retirement benefits for the first time.

For those born in 1956 however, their Full Retirement Age is now 66 and 4 months and this figure will increase for each birth year after 1955 as seen in the chart below:

Withholding Amounts for Early Filers Increased

If you are under your Full Retirement Age and claim your Social Security while still working, you need to be especially careful to avoid the Social Security Earnings Test. Basically, if you fall into this group, for every $2 that you earn over $17,040, $1 in Social Security benefits will be withheld.

This money is not permanently lost, but is credited to your account at Full Retirement Age.

If you reach your Full Retirement Age in 2018, your Social Security Earnings Test limit is quite a bit higher. You can earn up to $45,360 in the months before you reach your Full Retirement Age without your benefits being subject to any withholding.

The Bottom Line

Deciding when to file and how to file in order to maximize your benefits is always a complicated and unique decision.

Your Social Security options and strategy are specific to you and you should always work with an advisor that is an expert in the laws and rules that apply to your case in order to maximize your benefits.

If you would like to schedule a Free Initial Consultation with an advisor to discuss your best strategy or for assistance with applying for Social Security, you can do so by clicking here: Weiss Free Initial Consultation.

If you have a general question, you can also use our easy and free online chat to have your question answered by one of our advisors by clicking here: Ask a Question

Working with a knowledgeable Social Security advisor such as the service offered by SocialSecurityAdvisors.com is highly recommended given the complexity of the rules and that expert advice is critical when determining how best to maximize your Social Security.

Until next time,

Matthew Allen

Matthew Allen is the Co-Founder/CEO of Social Security Advisors and creator of the new course Maximizing Your Social Security produced in conjunction with Weiss Educational Services. Matthew has helped thousands of seniors maximize their Social Security benefits and avoid costly mistakes when filing. Matthew has been at the forefront of financial services for over a decade.