The Social Security Administration (SSA) has announced the cost-of-living adjustment (COLA) for 2018 will be 2%, the biggest increase since 2012. The adjustment is based on the increase in the Consumer Price Index (CPI) from the third quarter of 2016 through the third quarter of 2017.
The SSA also announced the maximum amount of earnings subject to Social Security taxes will increase to $128,700 from the current level of $127,200. Employees will continue to pay 6.2% in payroll taxes on wages up to the earnings cap, while all wages are subject to the Medicare payroll tax of 1.45%. Since 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9% in Medicare taxes.
Medicare Part B premiums for 2018 have not yet been announced, but are expected to remain stable at $134/month for most people. Those with higher incomes are subject to the Income-Related Monthly Adjustment Amount (IRMAA) premium surcharge. They should expect premium increases again this year because the tiered income brackets have been adjusted downward, meaning more people at lower income levels will be subject to IRMAA. Medicare premiums for 2018 should be announced in November.
If you have any questions pertaining to your particular Social Security situation, please contact one of our financial planners at (858) 509-9500.