Social Security is all about numbers — your age, the amount of money you earn, the current inflation rate and other variables — and they all play a role in the amount of money you’re entitled to. Every year, these numbers are subject to change. For 2018, there are a number of changes to the Social Security program. Here’s a look at which variables are changing and which remain the same so you can maximize your benefits in 2018.
1. Estimated Average Monthly Social Security Benefits
Social Security benefits are keyed to the inflation rate. When inflation rises, as indicated by the Consumer Price Index, a cost-of-living adjustment kicks in for both Social Security and Supplemental Security Income recipients. The Social Security COLA adjustment in 2018 is 2.0 percent. Here’s how that cost of living increase breaks down across different Social Security program participants:
Average monthly benefit for all retired workers:
Aged couple, both receiving benefits:
All disabled workers:
Start With the Basics: How to Apply for Social Security
2. Maximum Taxable Earnings
Taxes in the Social Security program come in two forms: Social Security taxes and Medicare taxes. The tax rates remain the same in 2018: 6.20 percent for Social Security and 1.45 percent for Medicare. Since self-employed workers are responsible for both the employer and employee portions of Social Security tax, the self-employed rate is 15.30 percent in 2018, the same as in 2017. Still, what you pay into Social Security isn’t what you get out. That’s just one Social Security myth you need to watch out for.
“Maximum taxable earnings” refers to the income ceiling on which taxpayers must pay Social Security taxes. Above that level, Social Security tax is no longer deducted. Medicare tax continues to have no level of maximum taxable earnings in 2018, meaning all earnings, no matter how high, face Medicare taxes. Here’s the change in the maximum taxable earnings level for Social Security taxes in 2018:
3. Quarter of Coverage
To qualify for Social Security, you have to earn wages in at least 40 quarters (called “quarter of coverage” in Social Security-speak). Despite the name, you can earn a quarter of coverage by earning a certain amount of taxable earnings in a given year, regardless of how long you work for that money. You can earn a maximum of four quarters of coverage per year. The amount needed to garner a quarter of coverage will rise slightly in 2018:
4. Retirement Earnings Test Exempt Amounts
If you retire before full retirement age but continue working, your Social Security benefits might be reduced. For 2018, the amount you can earn in retirement before facing this reduction has been increased slightly, depending on your age:
Under full retirement age, benefits are reduced by $1 for every $2 you earn above the limit.
2017: $16,920/yr ($1,410/month)
2018: $17,040/yr ($1,420/month)
The year you reach full retirement age, benefits are reduced by $1 for every $3 you earn above the limit, until you reach full retirement age.
2017: $44,880/yr ($3,740/month)
2018: $45,360/yr ($3,780/month)
Beginning the month you reach full retirement age, your earnings won’t be reduced. Continuing to work in retirement is one of many ways to make your retirement savings last.
5. Social Security Disability Thresholds
To qualify for disability benefits, a worker must demonstrate the inability to perform substantial gainful activity. If you earn more than a certain level, known as the Social Security disability threshold, you’re considered to be participating in a substantial gainful activity. Find out how social security disability benefits work. The SGA level varies depending on whether or not you are blind:
2017 SGA thresholds: $1,170/month (non-blind), $1,950/month (blind)
2018 SGA thresholds: $1,180/month (non-blind), $1,970/month (blind)
A trial work period gives you the opportunity to test whether or not you are still disabled without being disqualified for benefits. You’re allowed to earn as much as you like in a trial work period for nine months in any rolling 60-month period. The TWP threshold, which triggers the count on one of these nine months, rises slightly in 2018:
2017 TWP: $840/month
2018 TWP: $850/month
6. Maximum Social Security Benefit
Your monthly Social Security income in retirement is based primarily on your earnings level throughout your working career, along with the age at which you retire. Since the amount of income you pay Social Security tax on is limited (by the “maximum taxable earnings” level), the maximum amount you can earn in Social Security payments in retirement is also limited. Here’s the change in the maximum monthly payout level between 2017 and 2018:
7. SSI Federal Payment Standard
Supplemental Security Income is payable to two groups of individuals with limited resources: those 65 and older, or disabled adults and children. The monthly payout amount is subject to cost of living adjustments, the same as Social Security retirement payments. As a result, the Social Security increase in 2018 for SSI payments moved up 2.0 percent, the same as retirement payouts:
2017: $735/month individual, $1,103/month couple
2018: $750/month individual, $1,125/month couple
8. SSI Resource Limits
To qualify for Supplemental Security Income, you must have limited resources. While the broad definition of resources includes everything that you own, the SSA has a wide range of excludable assets, including your home, one vehicle, burial plots, household goods and business property. The resource limits for 2018 are unchanged from 2017:
2017: $2,000/individual, $3,000/couple
2018: $2,000/individual, $3,000/couple
9. SSI Student Exclusion
The Social Security Administration allows blind or disabled students to earn a certain amount of income without it impinging upon their SSI benefits. As with Social Security retirement and SSI federal payment standards, the SSI student exclusion amount is tied to changes in the inflation rate. As a result, income limits for 2018 will rise by 2.0 percent:
2017: $1,790 monthly limit, $7,200 annual limit
2018: $1,820 monthly limit, $7,350 annual limit
10. Retirement Age
Retirement age might sound like a singular number, but it’s a bit of a fluid concept when it comes to Social Security. While anyone can begin taking retirement benefits at age 62, their monthly checks will be reduced. Full retirement age used to be 65, but it has been steadily rising. Full retirement age is 67 for those born in 1960 or later. The age of full retirement will continue to rise annually until 2022, when those born in 1960 have reached age 62. Even though your monthly check will be reduced, there are ways early retirement can boost Social Security benefits.
As of 2017, people born in 1955 are eligible to begin taking retirement benefits, as they are age 62. In 2018, those born in 1956 become eligible. Full retirement age changes from 2017 to 2018, as follows:
2017: If you were born in 1955 and became eligible for benefits, full retirement age is 66 years and 2 months
2018: If you were born in 1956 and became eligible for benefits, full retirement age is 66 years and 4 months
About the Author
After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.