3-D printing has revolutionized production, problem-solving, and manufacturing. The creation of 3-D items, once only the right and privilege of factory owners and designers, is now available to the rest of us. When printing in 3-D, you can see something from all its angles, no longer just the 2-D blueprint or chart, but a new perspective to see the full picture. . The advantages from 3-D printing - everything from home manufacturing to healthcare - are still being discovered.
Changes to Social Security always happen in 3-D. All of it’s intricacies and complexities have created dependencies that are hard to comprehend in 2-D. Like a widget made by a 3-D printer, the many small parts of Social Security are best viewed in multiple dimensions.
Every year or so, Congress changes the component parts, making this task slightly more complicated. Last year’s model parts won’t fit this year’s components—Tab A no longer fits into Slot 2B. That’s why we’ve decided to look at some of this year’s differences, to give you a brief 360 overview and shed some light on the 3-D changes in Social Security.
This year’s changes can be roughly categorized as “us” (changes in your age and eligibility) and “them” (changes in how the system works).
“Us” – Changes in Your Eligibility and Age
1. Full Retirement Age (FRA)
Much ink has been spilled about the age of eligibility for those looking to take social security. This used to be much more simple, and has become complicated of late as people live longer and the storehouses for Social Security steadily deplete. The following chart lays out some of the progression for this year:
|If you were born in...||Your full retirement age is...|
|1954 or earlier||66 years|
|1955||66 years, 2 months|
|1956||66 years, 4 months|
|1957||66 years, 6 months|
|1958||66 years, 8 months|
|1959||66 years, 10 months|
|1960 or later||67 years|
This adds two months per birth year, in order to gradually reach the full-retirement age (FRA) of 67 as per a movement of congress in 1983. Full retirement age, for as long as most of us can remember, has been 65, but has increased over the last generation. In calculating your benefits, especially if you plan to take them at age 62, it’s important to know your FRA and how it will affect your pay out. Additionally, delaying when you claim Social Security, up to age 70, has a direct impact to the amount of money you will receive. Once you begin claiming Social Security, you cannot retroactively delay, so be sure to understand how your retirement income is affected.
2. Tax Cap
The tax cap has also gone up for yearly earnings. In the past, anything over $127,200 was non-taxable for Social Security. This has risen $1200, so that anything over $128,400 still has Social Security drawn against it.
3. Earnings Test Limits
If you plan to take benefits at age 62, you may also be affected by the allowable earnings limits for those who retire under the FRA. Simply put, if you reach FRA after 2018, $17,040 in earnings are excluded from consideration. Beyond this dollar amount, your benefits can be reduced by $1 for every $2 you earn. If you reach FRA during 2018, $45,360 in earnings are excluded. Above this threshold, your benefits can be reduced by $1 for every $3 you earn.
“Them” – Changes to the System
1. More Cash on the Barrelhead
It all comes down to dollars and cents, and current recipients will see a minimal raise this year in benefits. Individuals who receive benefits will see a $27 per month raise to $1,404; couples will see a raise of $46 to $2,340. The maximum Social Security benefit has also gone up $101 to $2,788. Most of the raise is due to finally having…
2. A Decent Cost-of-Living Adjustment (COLA)
Starting in December 2017, there’s been a 2 percent raise for cost of living. This is mostly due to inflation, and is the highest COLA in six years. However, it is still low historically, as the COLA is usually around 3.8 percent for the past 40 years. In a changing and more expensive world, the Social Security administration is at least responding, although perhaps not in lock-step.
3. Technological Progress
Social Security statements have been paperless for those under 60 since 2017. If you want to get an idea of your future benefit, you can set up a My Social Security Account online. Here you can check your earnings history and see your projected benefits. Soon the familiar snail mail statement won’t exist for recipients at all.
Security measures have been adjusted as well, as they have everywhere in the internet age. My Social Security Account holders will have to enter a one-time security code, and then enter username and password every time they sign on. Medicare/Medicaid also started mailing out new Medicare cards recently without Social Security numbers on them as an additional security measure.
These are just a few – the major ones – of the changes in Social Security in 2018. “Change is the only constant in life,” said the Greek philosopher Heraclitus, and that is true of Social Security as well. What was once a fairly reliable, straightforward program has grown in complexity along with the world – a world in which people are living longer and economies are always tightening.
On every complicated journey though, we are thankful for guides. Atlas Wealth Advisors has experts on hand to offer guidance and clarity – in Social Security and all aspects of retirement finance. If you’re looking for someone to help you on your path, let’s get in touch.