The Social Security Administration announced some important program updates last month. The updates will take effect in 2018 and after reviewing these changes, I have to say I feel pretty good about some of these items and think my clients and readers will too.
The most positive news is benefits for current Social Security recipients will go up by 2 percent next year in a cost of living adjustment. The government says this raise will increase the average program benefit by $27 per month for a single household, and $46 for a couple. The maximum benefit for a retiree initiating benefits at the new full retirement age of 66 and four months will also go up by just under $100 per month.
It's been a few years since Social Security recipients got a material “raise." This year benefits were increased by only 0.3 percent and there was no increase at all in 2016.
On the flip side, the tax base for Social Security payroll taxes is also being increased for 2018 from $127,200 to $128,700. This will cost workers with income at these ranges to pay an additional $93 in payroll taxes or $186 in self-employment tax.
Social Security has also tweaked the earnings limit for early benefit recipients who continue to work. These people will now be able to earn up to $17,040 before their Social Security benefits are reduced by $1 for every $2 earned over this level.
On the practical side of the page, Social Security has also enhanced the security on its website to a new two-factor authorization which increases security dramatically. This is super important as the recent Equifax breach could have put much of the information needed to establish a Social Security login account into potentially nefarious hands. We are suggesting to all clients, regardless of age, that they go to socialsecurity.gov and establish an online access account to protect themselves and their benefits.
Also please note, before you spend your raise, that unfortunately, for some Social Security recipients that have their Medicare Part B premiums automatically deducted from their Social Security payments, these payments have been artificially suppressed by a rule that prevents Medicare premiums from rising faster than Social Security benefits. This means that for some people the expected 2018 increase is likely to absorbed by previous Medicare premium increases that have not yet been applied. Sorry, I know this kind of confusing, but it had to be mentioned.
Social Security continues to be an extremely complex program. It is important to understand all of the various claiming strategies available as you begin to consider initiating benefits. Single benefit recipients have a good number of options, but married couples have much more. At Oak Partners we use a sophisticated software package to analyze benefit options and educate clients. It is, of course, best to go into the process of establishing benefits as informed as possible.