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Social Security recipients will soon receive the largest increase in their monthly benefits that they’ve seen in six years.
The U.S. Social Security Administration announced Friday that beneficiaries will receive a 2 percent cost-of-living adjustment, or COLA, next year.
As a result, a worker who was receiving $1,377 per month in Social Security benefits prior to the COLA would receive $1,404 after the COLA takes effect, according to Social Security Administration estimates. A couple receiving $2,294 before the COLA would receive $2,340 after.
The COLA will take effect in January for more than 61 million people who receive Social Security benefits. It will take effect on Dec. 29 for more than 8 million people who receive Supplemental Security Income (SSI) benefits — income supplements for people who are aged, blind or disabled and who have little to no income.
The 2 percent increase for 2018 is the largest since 2012, when beneficiaries received a 3.6 percent bump. The COLAs for the past five years were:
- 2017 — 0.3 percent
- 2016 — 0 percent (no adjustment)
- 2015 — 1.7 percent
- 2014 — 1.5 percent
- 2013 — 1.7 percent
By law, COLAs are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers maintained by the U.S. Department of Labor. COLAs are meant to counteract the effect of inflation on Social Security and SSI payments.
Changes affecting workers’ paychecks
Another Social Security change that will take effect in January impacts workers rather than retirees. The maximum amount of a worker’s earnings subject to the Social Security tax will increase from $127,200 to $128,700. So more of your income could be subject to Social Security taxes next year.
The change is a result of an increase in average wages. It will affect about 12 million of the estimated 175 million workers who will pay Social Security taxes in 2018, according to the Social Security Administration.
The administration has also increased the earnings limits for folks who work while receiving early Social Security benefits:
- The earnings limit for workers who have yet to reach what the SSA considers full retirement age will increase slightly to $17,040. If these workers earn more than that, $1 will be deducted from their Social Security benefits for every $2 earned above the limit.
- The earnings limit for workers who turn 66 in 2018 will increase slightly to $45,360. If these workers earn more than that, $1 will be deducted from their Social Security benefits for every $3 earned above the limit until they turn 66.
There is no earnings limit for workers who will be of full retirement age or older for all of 2018.
To learn more about the potential perils of working and collecting Social Security payments before full retirement age, check out “Want to Work While Collecting Social Security? Be Careful.”
If you have yet to start receiving your Social Security benefits, check out “Maximize Your Social Security” to learn how you can obtain a personalized report on the best way to claim benefits.
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