Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2 percent in 2018, the Social Security Administration announced on Friday.
The 2 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018.
Increased payments to more than 8 million SSI beneficiaries will begin on December 29, 2017 (note: some people receive both Social Security and SSI benefits).
The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Some other adjustments that take effect in January of each year are based on the increase in average wages.
Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700 from $127,200.
Of the estimated 175 million workers who will pay Social Security taxes in 2018, about 12 million will pay more because of the increase in the taxable maximum.
The news is a welcome change from last year, as low inflation kept the 2017 cost-of-living adjustment for Social Security payments disappointingly small, rising just 0.3 percent. That amount added roughly $4 to the average recipient’s benefits, which, coincidentally, made the case for proper 401(k) planning.
The 0.3 percent adjustment began with benefits payable to 60 million Social Security beneficiaries in January 2017. Increased payments to 8 million SSI beneficiaries began on December 30, 2016.
Cost-of-living adjustments (COLAs) are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is determined and published by the Bureau of Labor Statistics, Department of Labor.
Annual reports by the Board of Trustees for the Social Security Trust Funds show estimates of future COLAs.