Things to Consider Regarding Your Benefits
Social Security is a critical component of the retirement plans of many Americans, making it critical to keep up with annual changes in the program. None of the changes for 2018 are as substantial as the recent tax code overhaul, but it still pays to review the changes at the beginning of the year to verify their effect – or lack thereof– on your situation. Consider these seven Social Security changes for 2018.
1. Increase in Full Retirement Age (FRA) – You can claim Social Security benefits at age 62, but your FRA is the age at which you can claim full benefits without a monthly reduction. The FRA is in gradual transition from 66 for those born in 1954 and earlier to 67 for those born in 1960 or later. Two months have been added to the FRA for each birth year from 1955 to 1960. As the FRA is extended, benefits of those claiming early are decreased a bit further. Take this into account as you plan your retirement strategy.
2. Higher Cost-of-Living Adjustment (COLA) – The one upside of inflation is an automatic increase in Social Security benefits via a COLA. While still low compared to the 3.8% average COLA since 1975, the 2% increase for 2018 is the most in six years because of relatively low inflation experienced during the economic recovery. Unfortunately, the increase may be wiped out for many seniors through premium increases for Medicare Part B.
3. Higher Taxable Earnings Cap – In 2017, wage income was subject to Social Security tax only up to a $127,200 threshold. In 2018, the taxable earnings threshold rises to $128,700. Higher-wage earners receive a slight break.
4. Higher Earnings Limits – When you claim Social Security before your FRA, you can work and receive income up to a certain threshold without reducing your benefits. For 2018, the threshold earnings value is $17,040. With income beyond that point, retirement benefits are reduced by $1 for every extra $2 that you earn.
The rules are slightly different for the year in which you reach your FRA. If you will achieve FRA during 2018, the earnings limit is $3,780 per month for all months that you remain below the FRA. Income above that threshold is reduced by $1 for every extra $3 that you earn.
For those receiving Social Security Disability benefits, the monthly earnings threshold that can be earned without affecting benefits rises to $1,970 for those who are blind and disabled, and $1,180 for the non-blind disabled.
5. Higher Beneficiary Payments – It may be swallowed up by other expenses, but at least the average benefits check is larger. The Social Security Administration (SSA) expects the average paycheck to increase by $27 per month to $1,404 for individuals and $46 to $2,340 for couples. The maximum benefit has also increased from $2,687 per month to $2,788 per month – a 3.7% increase.
Supplemental Security Income (SSI) disability monthly payments are set to increase to $750 for individuals and $1,125 for couples. (Social Security Disability Income (SSDI) payments are scaled to work records, as with regular Social Security payments.)
6. Social Security Credit Increase – To be eligible for Social Security, you must earn 40 earnings credits over a lifetime with no more than four in any one year. As of 2018, each credit requires $1,320 in earnings.
7. Online Accounts – The SSA used to mail out paper statements to show past annual earnings and estimate Social Security benefits, but most workers will no longer receive paper statements after 2017. Only those who are over 60 and aren't receiving Social Security benefits will receive paper statements, and that's if they do not have a my Social Security account. With a my Social Security account, you can check your earnings statements and review your estimated benefits at any time regardless of your age.
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