Social Security Update

The good news is that the Social Security Administration announced monthly benefits will increase by 2% starting in January 2018, which works out to an average increase of about $25 per month. While that might not sound like much, it is better than the zero increase in 2016 and/or the 0.3% increase in 2017. In fact, it is the largest increase in retirement and survivor benefits for workers and their families since 2012. This will affect about 69 million people. Social Security is funded by a tax on earnings, but there is a cap. The cap on earnings will be increased from $127,200 this year to $128,700 next year. Frankly, we are surprised it wasn't higher as this is less than a 2% increase. For those who file for Social Security before Full Retirement Age (age 66 for those born before 1955) and continue to work, earned income may affect Social Security benefits. The maximum earnings for 2017 is $16,920 before Social Security is reduced by $1 for every $2 earned above this level. That level increases to $17,040 in 2018. There is a higher limit for those who turn 66 in 2018. For every $3 earned above $45,360 next year the Social Security benefit will be reduced by $1. The bad news is that the Medicare Part B premium is going from $109 per month to $134 per month. This means the Social Security increase will not bring any future purchasing power as it will be virtually used up with this Medicare increase.