Low inflation might be a plus for the economy in general, but when it comes to Social Security benefits, low inflation means a small “pay” raise. That’s somewhat the case for 2018, as benefits will jump a just 2%. Benefit recipients will see the raise beginning with the checks to be issued the first week of January 2018. Even though small, this increase is welcome because there was just a .3% cost-of-living increase in 2017. The Medicare Part B premium that is automatically deducted from Social Security check will remain at $134 for the vast majority of beneficiaries. Fortunately, however, because of a “hold harmless” provision, those who were on Medicare prior to 2017 and were receiving Social Security benefits won’t see their premium increase in excess of the increase in their Social Security. On the other hand, all seniors with higher incomes will pay an increased Medicare Part B premium. Seniors with “modified adjusted gross income” of at least $85,000 ($170,000 for couples) a year are subject to the Medicare premium surcharge.
With this 2018 COLA, the maximum retirement benefit for a worker retiring at full retirement age in 2018 increases slightly to a lofty $2,788 per month. Remember, however, that full retirement age is now age 66 for those born in 1943 through 1954. Full retirement age will gradually increase so that it will eventually become age 67 for those born in 1960 or later. The earliest a person can start receiving Social Security retirement benefits will remain at age 62. The average monthly benefit for all retired workers in 2018 will rise slightly to $1,404.
THE 2018 EARNINGS LIMITS
SENIOR CITIZENS’ FREEDOM TO WORK ACT OF 2000
When this article was first posted in 2000, there were limits on the amounts retirees between ages 65 and 69 could earn without sacrificing any benefits. Thanks to the Senior Citizens’ Freedom to Work Act of 2000, those who have reached full retirement age (full retirement age is 66 for those born 1943-1954) can continue to work and have unlimited earning without causing a reduction in their Social Security benefits. This change became effective as of January 1, 2000. Prior to this change, those between ages 65 and 69 saw a reduction in their benefits if they had excess earnings.
Unfortunately, there is still an earnings limit for those who elect to start receiving Social Security benefits before reaching full retirement age. Social Security retirement benefits are reduced at the rate of $1 for every $2 over the limit. For the year 2018, the earnings limit is now $17,040. In addition, if your spouse is receiving benefits based on your earnings, their benefits are also reduced due to your excess earnings. However, in the year you reach full retirement age, $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach full retirement age. For 2018, this other limit is $45,360. Once you hit full retirement age, it’s truly the golden years as you can earn as much as you want thereafter without having your Social Security benefits reduced. For more on these rules check the Social Security website.
Those under full retirement age should keep in mind that it’s only earnings from self-employment and wage income that are considered in determining whether your earnings exceed the limits. That is, interest, dividend and other so-called passive income is not counted. Neither are capital gains or most forms of rental income. The bottom line is that investment income won’t cause you to lose your Social Security benefits.
Those receiving Social Security who are still in the work force should be aware that their current earnings may actually entitle them to a larger Social Security benefit. This would be the case if their current earnings are greater than their earnings in earlier, pre-retirement years. If your post-retirement earnings have increased significantly, you should ask the local Social Security office to recalculate your benefits.
Finally, those still in their working years should periodically make sure the Social Security Administration has an accurate record of your earnings. They used to send an annual statement, but because of budget constraints, they now only send the statements to those age 60 and older who aren’t receiving benefits and don’t have a “my Social Security” account. As such, if you want to keep closer tabs on your record, create an online account at the Social Security website. After you register, you’ll be able to get a full report of your earnings record and projected benefits. If you don’t want to create an online account, you can still receive an earnings statement by mail by completing a “Request For Social Security Statement” (Form SSA-7004).