Recent Rise in Social Security Figures

February 13, 2018

Recent Rise in Social Security Figures

The new Social Security withholding tax of 6.2% takes effect on 2018 salary, or self-employment income, up to $128,400 (which was previously $127,200). The Social Security Administration (SSA) initially announced $128,700, which was later reduced by $300.

For FERS workers, the tax remains at that figure, but CSRS Offset workers/employees continue to pay it. The money also goes into the federal retirement and not the social security trust fund (SSTF) account anymore. Moreover, CSRS employees do not pay Social Security taxes, but their money goes into the federal retirement fund.

The 1.45% Medicare tax that all employees pay has no limit, but sometimes it is added to the regular FICA tax and tagged as Social Security tax. Even in that case, only the FICA part is apportioned to Social Security.

For beneficiaries of Social Security retirement benefits, the annual earnings limit applying to a beneficiary aged 62 through 66 (full retirement age) has increased from $16,920 to $17,040. $1 is deducted from a beneficiary’s Social Security benefits for each $2 he/she earned above the $17,040 limit. There is also a different earning test which applies to earnings for months in a particular year that a beneficiary attains full retirement age (66 years), but before the beneficiary reaches 66 years old. $1 is deducted from the beneficiary’s Social Security benefits for each $3 he/she earned above $45,360, up from $44,880. No limit is placed on what an individual earns starting from the month he/she reaches age 66 (full retirement age).

For the purpose of computing the benefit offset using the Windfall Elimination Provision (capable of reducing Social Security benefits of retires under CSRS), there could be an increase in the minimum annual substantial earnings from$23,625 to $23,850.