Senior citizens should enjoy the golden moment of living out their retirement years. After working so many decades, senior citizens should have some money saved to cover basic necessities such as food, shelter, and healthcare.
According to the United States’ Census Bureau, 13.3 percent of the U.S. population consisted of senior citizens in 2011. They account for 20 percent of the population by 2060. The bureau also projected that the number of seniors will reach 92 million by 2060, with 18.2 million age 85 or older.
But what do seniors spend the most on? Data from the Bureau of Labor Statistics showed that housing remains to be the greatest expense in dollar amount as well as a share of total expenditures for households with a reference person of 55 and older. Next, clothing, transportation spending, and contributions for pensions and Social Security decline with the age of the reference person. Lastly, healthcare spending increases with age.
Retirees to benefit from increases in the cost of living in 2018?
According to a report, retirees will benefit from an increase in the cost of living this year. In areas such as Social Security, beneficiaries are set to receive a 2 percent cost-of-living adjustment in benefits. It raises the average monthly payout of a retiree by $27 to $1,404.
The increase in Social Security will also be consumed by higher Medicare premiums. The basic Medicare premium is forecast to hit $134 per month or $25 more than the average premium paid by enrollees in 2018.
Meanwhile, contribution limits for 401(k) and other employer-provided retirement savings plans will increase by $500. Together with this, maximum contributions to health savings accounts are expected to go up as well.
How does social security affect costs on Medicare?
About 46 million Americans are waiting for a Social Security cost-of-living increase. In the last two years, small or non-existent cost-of-living adjustments have kept Medicare premiums at bay thanks to a Social Security provision that is known as “hold harmless.” This means that premium increases for Medicare Part B, which covers doctor visits and outpatient care, cannot be worth more than the recipient’s Social Security cost-of-living increases.
However, this year’s Social Security adjustments of 2 percent are the largest in a decade. In 2017, it was just a 0.3 percent increase. Because of this, Medicare users who are paying below the standard premium rate for Medicare Part B will see their premiums rise this year. Recipients pay $110 per month or less for Part B. However, they will now pay $134 or more, depending on their income.
Changes in Social Security this year
The full retirement age is gradually increasing, and several thresholds and other Social Security figures are adjusting over time with inflation. This year, there will be some changes in Social Security and here’s what to expect:
Full retirement age is increasing for eligible seniors
For some time, the median retirement age for Social Security benefits has been 66 years of age. However, that will increase to 67 for Americans born after 1954. Americans claim their Social Security before they reach full retirement age, and the change can have an effect in terms of a more dramatic reduction in early retirement.
Cost-of-living adjustment for retirees
The Social Security Administration announced a 2 percent cost-of-living adjustment for beneficiaries beginning with the December 2017 payment. It is the highest cost-of-living adjustment in six years thanks to inflation.
Higher payments for beneficiaries
The cost-of-living adjustment will help to produce higher checks for beneficiaries. Because there is also a higher taxable earning cap in 2017, the maximum benefit will significantly increase. The benefit payable to a worker retiring at their full retirement age is rising over $100 to $2,788 per month in 2018.
Higher taxable earnings cap
Every year, the maximum amount of wage income is subject to Social Security tax. In 2017, the maximum was set at $127,200. Any amount that exceeds the threshold will not be eligible for non-taxable Social Security. Because the maximum taxable earnings amount is rising by $1,500 to $128,700, high-income individuals will pay more in Social Security tax.
Rise in disability thresholds
Social Security pays disability benefits to over 10 million people, and there are maximum amounts of income that people can earn while collecting disability benefits. Those numbers will rise slightly this year. For instance, the threshold for non-blind disability was at $1,170 in 2017, and the threshold for 2018 is at $1,180.
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