Social Security Announces COLA for 2018

Each fall, Social Security announces whether they will be releasing a cost of living adjustment (COLA) for beneficiaries, taking effect the following January. In recent years, COLA has been historically small or non-existent, but this year we have good news for recipients of Social Security: Checks will be rising by 2 percent, beginning January 1.

Two percent doesn’t sound like a lot, but it’s the largest COLA we’ve seen since 2012. That’s because cost of living adjustments are based upon the inflation rate, which has remained mostly flat for about half a decade now. Since this year’s inflation rate did increase slightly, beneficiaries will finally receive a small raise in their benefits.

So how much is 2 percent, exactly? For the average Social Security recipient, it amounts to about 27 dollars. The average benefit check will now be $1,404 per month.

A cost of living adjustment also means the maximum possible benefit will increase slightly, to $2,788 per month.

This sounds like great news for Social Security recipients, who often must contend with a rise in the cost of living even if inflation appears to be flat. But before you get too excited, consider that Medicare premiums are also set to rise in January. Medicare hasn’t released their new rates yet, but with the cost of healthcare increasing for everyone, a hike in premiums would not come as a surprise.

Also, keep in mind that if you continue to work after claiming Social Security benefits, your checks can be taxed. If you haven’t yet reached your full retirement age, and you’re receiving benefits, you are subject to certain earnings limits on wages or self employment income. Those limits are set to increase slightly in 2018: If you’re under full retirement age for the entire year, you will lose one dollar of benefits for every two dollars you earn over $17,040.

In the year you turn 66, you can earn up to $45,360 without any benefits being withheld. After you’ve reached that income threshold, one dollar of benefits can be withheld for every three dollars you earn over the limit. And then, once you reach full retirement age, you can earn all you want without losing any benefits.

Social Security will comprise part of your retirement income, but no one should expect to retire on Social Security alone. A diversified retirement income plan can prevent you from being overly affected by policy changes, which happen quite frequently and often without much warning. Give us a call, and we’ll help you plan for a stable retirement, hopefully free of any unpleasant surprises.