Social Security in 2018: 6 Key Facts You Need to Know
Social Security is vital for the financial planning of tens of millions of Americans, and every year, the Social Security Administration makes slight adjustments to key provisions of the retirement program. The SSA just released its annual report discussing changes to Social Security for 2018, and although some key components of the program are staying the same, others will see some minor adjustments. Below, you’ll find the most important facts about what’s happening next year with Social Security.
1. The 2018 cost-of-living adjustment will be 2%
Social Security recipients will see their monthly checks rise by 2.0% starting in January compared to what they received in 2017. The reason: The CPI-W measure of inflation rose by that amount during the months that the SSA uses to calculate COLAs each year. That will send the average monthly benefits for retired workers up to $1,404. Some retirees won’t see that entire 2% show up in their bank accounts. For those who participate in Medicare, premium increases in recent years could divert some of the COLA toward covering higher medical costs. Nevertheless, the 2% rise is the largest since 2012 and will be a welcome change from the tiny to nonexistent COLAs that Social Security recipients have seen in past years.2. Payroll tax rates stay the same
Tax rates for Social Security and Medicare will be the same as in 2017. Employees will pay a combined 7.65% of their wages into the programs, while employers will match that amount with a 7.65% tax of their own. The Social Security portion of what employees pay is 6.2%, while the other 1.45% goes to Medicare. Those who are self-employed will be responsible for the combined 15.3% amount for both employee and employer.3. Maximum taxable earnings will go up slightly
Taxes on Social Security are imposed only up to a certain maximum amount of earnings, but that maximum is going up in 2018. The new limit will be $128,700, up from $127,200 in 2017. That means that the maximum Social Security tax for employees in 2018 will be $7,979.40, up $93 from a year ago.