STARTING next year, Social Security recipients are set to see three major changes.
The Social Security Administration, SSA, provides financial support for Americans including those in retirement, with a disability, and offers survivor benefits.
Today, over 72.5 million people financially depend on one of its programs.
Those planning to claim benefits should plan accordingly as the SSA has announced some changes coming.
While the most talked about likely is the Cost of Living Adjustment, COLA, others will have an impact on recipients.
The U.S. Sun breaks down each change and how it will effect checks, taxes, and more.
1. COLA INCREASE
On October 10, the SSA revealed that recipients will see a 2.5% increase in their payments thanks to the COLA.
While this is a smaller increase than recent years, it’s still near the 20-year historical average of 2.6%.
The rise will mean an increase of $48 per month and bring the average monthly Social Security payment to $1,968.
Meanwhile, the maximum Social Security benefit for a worker retiring at full retirement age will grow to $4,018.
This is up from $3,822.
Just note the maximum applies to recipients retiring at the full retirement age – 67 for anyone born after 1960.
Benefits for widows, widowers and the disabled will also increase.
According to the SSA, the average widow with two children will see an increase to $3,761.
Individual widows and widowers will see a benefit increase to $1,832.
Lastly, a disabled worker with a spouse and one or more children will see their benefit rise to $2,826.
Just note that those numbers are expected averages and will likely vary based on specific factors.
All claimants can expect to see the increase reflected in their January payments.
WHEN SOCIAL SECURITY PAYMENTS ARE MADE
Social Security payments are issued on the second, third, or fourth Wednesday of each month based on the recipient’s birthdate:
- Second Wednesday: For individuals born between the 1st and 10th of the month
- Third Wednesday: For those born between the 11th and 20th
- Fourth Wednesday: For those born between the 21st and 31st
2. TAXABLE EARNINGS
For those working, there is a limit on the amount of your earnings that is taxable by Social Security.
According to the SSA, this amount is known as the “maximum taxable earnings” and changes each year due to an increase in average wages in the US.
This means that more of your working income is subject to taxes.
Starting next year, the maximum earnings will increase to $176,100, from last year’s $168,600.
3. EARNINGS TEST EXEMPT AMOUNTS
The Social Security Retirement Earnings Test, RET, is a test that reduces the monthly benefits of Social Security beneficiaries who are below full retirement age and earn above a certain amount.
The RET reduces benefits by a specific amount for each dollar earned above a threshold.
The threshold and reduction amount vary based on whether the beneficiary will reach the age of full retirement in the year.
Once you reach that age, your benefits are then recalculated to account for any benefits that were withheld while you were working.
Then, your monthly benefit will be permanently increased to account for the withheld benefits.
The exempt amounts typically increase annually with the national average wage index.
