If you are already receiving Social Security benefits, you will see a cost-of-living adjustment, or COLA raise, beginning in January 2018. Some additional changes are being made that will affect how much you will receive next year. For those still paying into Social Security, other changes to the program will have an impact on the amount you fork over to the federal government.
COLA of 2 Percent
Both Social Security and Supplemental Security Income (SSI) benefits will increase 2 percent in 2018. SSI beneficiaries will get their first raise December 29, 2017 and Social Security recipients will receive theirs in January. The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as determined by the U.S. Bureau of Labor Statistics.
In practical terms, when Social Security grants a COLA, the size of your check goes up. For 2018 the average Social Security benefit will increase $27 to $1,404. The maximum benefit for a worker at full retirement age will be $2,788 in 2018. It was $2,687 in 2017.
While a 2 percent COLA in 2018 is welcome, the overall history of benefit increases has not kept pace with inflation. In fact, in 33 of the past 35 years (not counting 2017) the cost of medical care alone has outpaced Social Security benefit increases. The COLA was 0 percent in 2009, 2010 and 2015. Last year it was just 0.3 percent.
Medicare Part B Increases
If you are enrolled in Medicare and protected by the “hold harmless” clause freezing your Part B premium when there is no COLA, you will likely see a jump in 2018 just as you did in 2017 when Social Security granted a 0.3 percent COLA. If you have been paying the full cost of $134 per month, your premium will only go up if the “full cost” premium increases.
Your annual income above a certain amount causes a Medicare Part B surcharge to kick in. That threshold will be lower in 2018, potentially reducing or eliminating any increase you see in your Social Security benefit. For individual income between $85,001 and $107,000 the surcharge will be 35 percent; for income between $107,001 and $133,500, it will be 50 percent; for income between $133,501 and $160,000, it will be 65 percent and for anyone making $160,001 and above, the surcharge will be 80 percent. (Limits for couples filing jointly are going up as well; check here for updates.)
Higher Taxes and Earning Limits
If you are working, you contribute 6.2 percent of your earnings to Social Security. In 2018, you will contribute this amount until your income exceeds $128,700. Previously, the income limit was $127,200. Anything you earn over the new limit will not be taxed by Social Security and will not be used to calculate your retirement benefits.
For those younger than full retirement age but collecting Social Security benefits, the amount you can earn before having benefits withheld is going up. The new earnings limit will be $17,040. If you earn more than that, Social Security will withhold $1 for every $2 above the limit. The limit is $45,360 for the year in which you reach full retirement, with $1 withheld for every $3 you earn over the limit. Once you reach full retirement, your withheld benefits are gradually returned to you.
Older Full Retirement Age
If you turn 62 in 2018, your full retirement age will be 66 years and four months. Full retirement age will continue to increase in two-month increments annually until it reaches 67. You can still sign up for Social Security as early as age 62. As the gap between full retirement age and age 70 decreases, your ability to grow your benefit by waiting to start taking it will also decrease.
Online Statements and Security
Social Security stopped sending paper statements to everyone under the age of 60 in 2017. To get your earnings history or a personalized estimate of your benefits, create an online My Social Security account.
Each time you log in you will need to enter a one-time security code sent to your smartphone or email address. Known as “two-factor authentication,” this requirement is in addition to your username and password. New Medicare cards without Social Security numbers will be mailed out beginning in April 2018. A fact sheet containing information about 2018 changes to Social Security is available here.