Your Social Security Check Will Increase in 2018, but Don’t Spend It Just Yet

If you are receiving Social Security benefits, you can expect a “pay raise” come 2018. The Social Security Administration recently announced a 2% cost-of-living adjustment (COLA), but don’t go spending that extra $27 a month just yet. Your Medicare premiums will probably spend it for you.

Medicare adheres to a “hold harmless” provision that keeps premiums from rising faster than COLAs. That keeps premiums from consuming your Social Security check.

In 2017, Medicare premiums jumped, but the Social Security Administration increased the COLA by only 0.3%. So if you are one of the many Americans who have Medicare Part B premiums deducted from your Social Security benefits, you probably didn’t see much of a change.

Don’t expect much of a change in 2018 either, since “hold harmless” isn’t likely to stop premium increases from absorbing the 2% increase in your benefits.

What other changes does the Social Security Administration have in store for us in 2018? Here are five:

You Will Need to Earn More to Be Eligible for Benefits

The Social Security Administration determines your eligibility for benefits via the work credit threshold. You have to earn 40 work credits over your career to qualify for Social Security, and you can earn up to four credits each year.

In 2017, a credit required at least $1,300 in earned income. For 2018, you will have to make a bit more to get your credits, as the threshold will increase to $1,320.

You Can Earn More Before Your Wages Get Docked

If you are receiving Social Security benefits and still working, you probably know that the Social Security Administration takes a portion of your wages after you earn a certain amount.

If you will not reach full retirement age (FRA) in 2018, then the wage threshold is $1,420 per month—up $10 from $1,410 in 2017. Beyond that, $1 out of every $2 of income will be withheld. (Be assured, though, that you will recoup the money via increased monthly benefits once you reach FRA.)

If you reach FRA in 2018, then you can earn up to $3,780 per month, up from $3,740 in 2017. After that, $1 will be deducted out of every $3 you make—but again, returned to you in the form of increased monthly benefits once you reach FRA. Moreover, once you reach FRA, Social Security will no longer deduct this money since the work credit threshold no longer applies.

Full Retirement Age Will Increase by Two Months

Speaking of FRA, if you are eligible to claim benefits in 2018 (meaning you were born in 1956), then you will have to wait two months longer to receive your full benefits at FRA.

This change is part of the Social Security Administration’s move to transition FRA from 66 to 67. So to receive full benefits, next year’s 62-year-olds will have to wait until they turn 66 years and 4 months (rather than 2 months).

Highest Wage Earners Will Be Taxed More—and Receive Larger Payouts

These two changes—taxes and payouts—are related since they affect the highest-paid Americans. If you are among that elite group and still working, your Social Security taxes will increase by about $93 in 2018. That is because the maximum amount of income that can be taxed is rising from $127,200 to $128,700.

If you are retired, then you can anticipate an increase in your monthly check. The Social Security Administration is raising the maximum monthly benefit by $101, or $1,212 annually. This increase applies to the 1 in 10 Americans who earned more than the maximum taxable income cap every year for at least 35 years—and, of course, waited until FRA to claim Social Security.