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Millions of Americans rely on some form of Social Security benefits, for their financial survival. Retirees, widows and widowers, disabled adults and children, all count on the system to be there when they need it. That makes changes to social security regulations and payment amounts, even more important.
Approximately 50% of people age 65 or older, depend on social security for half of their retirement income. 25% rely on the benefits for all their income. Highlighting the importance of the program, in poor households headed by someone on retirement income, social security is virtually the only source of financial support.
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So, to keep you up-to-date, we are covering all the adjustments for 2018. Most of the changes are good news for retirees, and those nearing retirement age. Several adjustments will directly impact the monthly amounts recipients will receive. Others, will help to ensure the stability of the program in the long-term.
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Let’s start with the important stuff first. In September, we shared with you the possibility that payments would increase. Well, the official announcement is out and social security recipients will get a 2% bump. Now we know that is not a lot of money but it is the biggest increase in six years. Progress, even in small increments, is better than nothing.
As a result of the change, the average payment for single persons will be approximately $1, 404. AARP is issuing an official statement on the importance of the increase. “Today’s 2 percent cost of living announcement gives some relief to Social Security beneficiaries and their families who depend on their earned, modest benefits,” says CEO Jo Ann Jenkins.
Interestingly, the Cost-of-Living Adjustment (COLA) dates back to 1975. It is based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W tracks how much consumers pay for goods and services. Therefore, several factors including jobs and the economy directly affect the index.
The best way to explain the cause and effect relationship between the CPI-W and the COLA is this- if prices go up, there is benefit increase. But, if prices on goods decrease, then benefits stay the same. Ironically, hurricanes Harvey and Irma most likely contributed to the increase.
For the 66 million retirees receiving payments, it is a complicated mess to say the least.
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Consequently, social security advocates see the CPI-W method of calculating benefits as a “catch-22.” The reason for that, is the fact that payment increases do not accurately address the real cost of living. The COLA is supposed to reflect the inflation they are dealing with in the present. However, critics argue that it’s not even close.
But, other new changes may help to solve that problem.
Changes for American Workers
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Some may see the following changes as bad but for the fledgling system, they are very much needed. As we have discussed previously, the majority of payments into Social Security come from payroll taxes. Workers pay 7.65% and employers make a matching contribution. Those who are self-employed, pay the full 12.4%.
However, there is an income limit that reduces the number of people paying into the program. Earned income between $0.01 and $127,200 is taxable by the SSA this year. Any income above and beyond this figure, is not. Next year, that cap is going up to $128,000. This means approximately 10 million more people will be contributing.
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In addition to the higher tax cap, the amount a retiree can earn while receiving social security will increase. This is good news for those who want or need to work. The SSA currently withholds one dollar for every two dollars in earnings, for wages above $16,920. This only applies to workers who are under full retirement age.
In 2018, that limit increases to $17, 040. Moreover, if someone is still working during their retirement year, the earnings limit is moving from $44,880 to $45,360. Beginning the month of full-retirement age, there are no withholdings. It is important to note, that these changes are for retirees.
For Social Security Disability recipients, the thresholds are different.
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For those receiving disability payments, earnings limits are also changing. Blind recipients will be able to earn up to $1,970 in 2018. Non-blind recipients can earn up to $1,180. Those who are in what’s called a “trial work period,” cannot have wages that exceed $850 per month. Keep in mind, these amounts vary individually and depend on things including age and work history.
Consequently, trustees are noting a decline in the number of Disability Insurance beneficiaries. Officials attribute the decrease to a healthier economy, where fewer older workers seek to qualify for that benefit as job opportunities are more plentiful. President Trump’s efforts to create a strong economy, are crucial to preserving the social security system.
Another critical step is reducing shortfalls in the SS budget, is protecting against fraud.
New Medicare Cards
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One of the many steps Social Security and DOJ officials are taking to reduce fraud and abuse, is new Medicare cards. SSA is mailing new cards to all 58 million recipients in April of 2018. The most notable change, is that SSN’s are no longer shown on the card. The new ID will feature a randomly assigned Medicare Beneficiary Identifier made up of 11 letters and numbers.
According to the Department of Justice, identity theft is increasing among the 65 and older population. The number of cases reached a staggering 2.6 million in 2014. And, thanks to new technologies, more sophisticated criminals are finding it much easier to steal social security numbers. That is the reason officials are working to update the antiquated program.
Modernizing the System
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While it is unlikely to happen in 2018, the White House is pursuing an initiative to end the use of social security numbers. Cybersecurity Czar, Rob Joyce, is heading the project that will replace SSN’s with safer and more modern technology. Cryptographic keys or a set of long random numbers are two of the options he is considering.
Speaking at a security summit earlier this month, Joyce admits that modernization is a necessity. “I believe the Social Security number has outlived its usefulness,” he says. “It’s a flawed system that we can’t roll back after a breach.” For the 145 million consumers affected by the Equifax breach, that is a major plus.
The new technologies Joyce is proposing,however, would provide individuals a secure means of storing and accessing sensitive personal data. More importantly, in the event of data breach, the numbers could be changed instantly to protect victims. It’s all pretty good news so far, right?
Well, we’re not done yet!
Lower Medicare Drug Premiums
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Approximately 43 million Americans are Medicare Part D recipients. For enrollees, prescription drug premiums often wipe-out their monthly payment increases. But not in 2018. For the first time in five years, those premiums are decreasing. According to the Centers for Medicare and Medicaid Services, beneficiaries are receiving a 3% reduction in costs.
The savings are the result of bids that drug plans have submitted for 2018. CMS attributes these lower bids to increasing pharmaceutical manufacturer rebates and other price concessions the plans are receiving. CMS Administrator, Seema Verma, says the agency keeping a promise to reduce costs for seniors.
“We are committed to making prescription drug plan premiums affordable so that seniors and people with disabilities in Medicare can access the prescription drugs that they need,” says Verma. “This is a step forward in fulfilling the Trump administration’s promise to lower the cost of prescription drug coverage, particularly for Medicare beneficiaries.”
Securing the Future
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As we said in the beginning, most of these changes for 2018 are advantageous for social security recipients. Payment increases and lower premiums are signs of a healthy economy, growing job market, and fewer burdensome regulations. Nevertheless, there is still plenty of work to be done. Thankfully, President Trump is working hard to create improvements.
And, contrary to claims by Democrats, the president is not making any cuts to social security. Treasury Secretary, Steve Mnuchin, made that perfectly clear back in March. “We are not touching [Social Security and Medicare] now, says Mnuchin. “So, don’t expect to see that as part of this budget.”
Nonetheless, it is President Trump’s own words that best sum-up his beliefs on social security:
“Social Security and Medicare are not wasteful entitlement programs. People who think this way need to rethink their position. It’s not unreasonable for people who paid into a system for decades to expect to get their money’s worth–that’s not an “entitlement,” that’s honoring a deal. We as a society, must make an ironclad commitment to providing a safety net for those who can’t make one for themselves.”
My Social Security Account
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Incidentally, if you have not already registered for an online social security account you should consider it. Creating an online account is fast and easy and offers you access to a great deal of information about your current or future benefits. Not to mention, it is also an excellent way to monitor any changes that may be happening with your payments.
Another benefit of having a MySSA account, is you can apply for a replacement social security card. If you are not requesting a name change, and you live in one of these 16 states, all you need is a valid photo ID to get a replacement card. To anyone who has spent an entire day at their local office, it’s a real time-saving change.