Social security retirement and social security disability (this involves medical record retrieval and comprehensive review of medical records) are America’s most significant social programs. In 2018, benefit, tax and qualifying guidelines are changing for social security. 61.5 million Americans were receiving benefits as of August 2017, and more than 42 million of these people were retired workers. It is estimated that 62% of these retired workers depend on their monthly benefits from the Social Security Administration (SSA) for at least half of their income, according to social security sources. In mid-October, Social Security announced its annual changes and here are some of the major changes to this program in the year 2018.
- COLA (Cost of Living) increase: Social Security beneficiaries will receive a 2% COLA adjustment in 2018, or around $27 more a month for the average retired worker. This is the best inflationary increase provided in 6 years. However, some recipients may see little or no increase at all. This is because Medicare enrolees who have their Part B premiums (outpatient services) deducted from their monthly benefits, and have been protected by the Hold Harmless clause (the clause that ensures Part B monthly premiums don’t raise at a quicker annual pace than Social Security’s annual COLA) in recent years, are likely to have some or all of their COLA increase consumed by Medicare.
- Wealthier Americans will have to shell out more to Social Security: In 2017, employees were required to pay a 12.4% payroll tax into Social Security on their earned income between $0.01 and $127,200. The maximum taxable earnings cap (i.e. $127,200) will be rising to $128,700 in 2018, with an increase of $1,500. However, in the case of workers working for someone else, the company they work for usually covers half of their Social Security taxes (6.2%). Thus most Americans typically pay Social Security 6.2% of their earned income between $0.01 and the maximum taxable earnings. Wealthy individuals who earn up to $128,700 can expect to owe at least an extra $93 in tax next year. Income earned above and beyond $128,700 will not be affected by Social Security’s payroll tax.
- Increase in maximum monthly benefits: If you have earned enough throughout your lifetime to qualify for the maximum monthly benefit at full retirement age, you can expect a significant increase in your monthly payout in 2018. The maximum payout at full retirement age (the age at which you become eligible to receive 100% of your monthly payout) will increase $101 a month, to $2,788 a month next year. This annual increase is for retired workers who were able to earn more than the maximum taxable earnings cap every year for at least 35 years.
- Full retirement age is on the rise: The full retirement age will be increasing in 2018, and newly eligible retirees born in 1956 will have to wait until they are 66 years and 4 months old before they can receive 100% of their monthly retirement benefits. This is a 2-month increase from 2017 for those born in 1955. You become eligible for benefits at age 62, with your benefits increasing by 8% annually until you reach age 70. The longer you wait to claim the benefits, the more you will receive. If you claim at any point between age 62 and a month before your full retirement age, you benefits will be permanently reduced. If you claim your benefits at any point after your full retirement age, you can earn more than 100%.
- Slightly higher disability income threshold: People receiving social security disability benefits will see a small increase in their monthly benefits. More than 10 million people receive disability payments from the SSA. Americans who aren’t blind will see their maximum monthly threshold increase by ten dollars a month, to $1,180. Legally blind people can earn up to $1,970 a month, i.e. a $20 per-month increase compared to the year 2017. If non-blind or blind people receiving social security disability cross these income thresholds in monthly earnings, their benefits could be stopped.
- Withholding thresholds for early filers will increase: If you enrol prior to your full retirement age, and are still working, the SSA may withhold part or all of your benefits based on how much you earn each year.
- In 2017, early filers below their full retirement age and had earned income over $16,920 a year ($1,410 per month) would have $1 in benefits withheld for every $2 in earned income over $16,920. For 2018, this threshold has been increased to $17,040 annually ($10 increase per month).
- For people who claim benefits during the year they are set to reach full retirement age but have not reached it yet, will find the threshold raised to $45,360 annually from the $44,880 limit in 2017.
- Qualifying for Social Security has become more challenging: To earn social security benefits, you have to earn 40 lifetime work credits, of which a maximum of four can be earned annually. In 2017, workers were able to earn a lifetime work credit for every $1,300 in earned income. $5,200 in earned income was enough to max-out coverage credits for the year. In 2018, you will require $1,320 in earned income per lifetime work credit or $5,280 for the full year.