Social Security Benefit Increase Announced for 2018
The Social Security Administration announced a COLA increase this month for 2018. Supplemental Security Income (SSI) benefits would increase by 2%. This is the first substantial increase in years.
How much is that? In 2017, the average person got $1,360 a month. A 2% increase means that the average beneficiary will get $25 more a month, or about $326 a year.
For some, this increase might not sound like a lot of money, but it’s a lot more than what retirees got in 2015 and 2016. It’s also a lot given the fact that one-third of our seniors depend on social security for virtually all their income.
Social security isn’t just for retirees; it’s also for people with disabilities. Therefore, the 2% increase also means that the 10 million Americans who are eligible for the social security disability payments will get a monthly payout increase of about $10 each month. The legally blind recipients will get a $25 increase each month.
The cost-of-living adjustment (COLA) will lead to a tax increase next year. As of August, workers were paying a social security tax of 12% on all earned income up to $127,200. But this is about to change. Next year, the taxable income cap will increase to $128,700. According to a report released by the Social Security Administration, more than 12 million workers will get a tax increase as a result of this adjustment.
But American workers should not worry much. Why? If you work for someone else, the organization you work for usually covers about 6.2% of your social security responsibilities. This means that most workers only cover half of their social security responsibilities, which means the new cost-of-living adjustment (COLA) will not affect their budgets that much.
Qualifying For Social Security Will Get Harder
In 2017, it’s was easy for American workers to qualify for social security. All you needed was to accumulate forty work credits, of which a worker could collect four each year. Most workers were able to earn a work credit for every $1300 in earned income.
Therefore, if a worker earned $5,200, it was enough to cover their coverage credits for the year. Simply put, before these changes, most workers could easily collect forty work credits if they worked for 10 years at a job that is subject to payroll taxes. But things are about to change come next year.
It’s going to be harder for working Americans to be eligible for social security benefits when they retire. Next year, you will be required to earn $1,320 to collect a lifetime work credit.
Hold Harmless Group Premiums for Low Income Medicare Recipients
Unfortunately, a large amount of Medicare recipients fall into the low income category. Those who are part of the “hold harmless” provision were protected from any Medicare Part B premium increase if it decreased the amount they received from Social Security.
The standard premium for 2017 for Part B was $134. Medicare recipients who were part of the hold harmless group paid on average $109. Since the social security COLA increased, that extra money will go towards their Part B premium instead of in their pockets.
The Withholding Threshold For Early Fillers Will Increase
Most people don’t know this aspect of social security, but if you enroll before you reach the full retirement age and you are still employed, the SSA can keep part or all of your benefits based on how much you make per year.
In 2017, early fillers who were still working and earned an income of over $16,920 a year had $1 in benefit withheld by the SSA for every $2 they earned. In 2018, the withholding threshold is expected to rise by $17,040 annually, or $10 a month.
Those who claim their social security benefits during the year in which they’re set to reach their full retirement age will also experience a similar change. In 2017, if you haven’t yet reached your full retirement age, the SSI withheld $1 for every $3 in earned income over $3,740 a month ($44,880 a year).
In 2018, experts estimate that this threshold will climb by $40 a month. That’s $3,780 a month, or $45,360 annually.
It’s worth noting that when the SSI withholds some of your benefits, it doesn’t mean you won’t get them back. No! The only reason why the SSI withholds some of your benefits is to ensure you don’t spend all your social security income and wages.
Once you reach the full retirement age, you will get your benefits back in the form of a higher monthly payout.