3 Significant Changes Coming To Social Security In 2018

Social Security is the cornerstone of most Americans’ retirement. Roughly 62% of current retirees count on Social Security for at least half their monthly income. One-third essentially live entirely on this monthly benefit.

Your retirement is likely better funded, thanks to years of hard work and careful planning. Still, your Social Security benefit can help fuel your post-career life, so it’s important to know what’s happening with the program. Here are three significant changes that are coming to Social Security in 2018.

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Full retirement age will increase. The age at which people born in 1956 or later can claim 100% of their Social Security benefits will rise to 66 years and four months – two months later than the current full retirement age. This upward tick is required by a Social Security law enacted in 1983 to address our increased longevity.

If you were born in ’56 or later, and claim Social Security at any time between 62 and 66 years and four months you will receive a reduced monthly benefit for life. On the flip side, if you can wait to take your benefit until anywhere from 66 years and five months all the way up to 70, you will receive payments higher than even the full retirement benefit.

In my opinion, there is no universal “right age” to start taking Social Security. The decision should be based on your individual circumstances. If for example, you are in declining health, it might make sense to start Social Security as soon as you are eligible. Conversely, if you truly don’t need the money, and expect to live many more active years, perhaps you should wait until your late 60’s.


Chart from the Social Security Administration

High earners might pay more. The Social Security tax currently applies to all wages up to $127,200. Anything above that is exempt. That top-end figure is based on the Social Security Administration’s National Wage Index, which tracks taxable wages. As the NWI increases so does the upper limit on Social Security taxability.

While wages haven’t exactly soared during this ongoing recovery, they do continue to trend upwards. That could lead to a modest rise in the top taxable wage, probably in the 3% range.

By the way, in case you haven’t looked closely at your pay stub recently, the Social Security tax is 12.4%, split 50/50 between you and your employer.

And the good news is… It’s highly likely that Social Security recipients will get a notable Cost of Living Adjustment (COLA) increase in their benefits in late 2018. The Social Security COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. That number has been creeping up, primarily due to increases in fuel costs. Earlier this year, the Social Security Board of Trustees predicted a COLA increase of 2.2%.

While 2.2% is better than nothing, it won’t change the lives of those who are solely or largely dependent on Social Security for their post-career income. Just another reminder of the importance of prioritizing retirement savings. If you haven’t done so, make that Number One on your 2018 to-do list.

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