Several notable changes to the funding and benefit structure of Social Security will be coming next year, the Social Security Administration (SSA) announced last week.
The nearly 25 percent of Americans who claim Social Security benefits will see a cost-of-living adjustment (COLA) of 0.3 percent next year, after receiving no adjustment this year.
The annual adjustment is linked to the consumer price index, which is determined by the U.S. Bureau of Labor Statistics. In recent years inflation has been low, with the prices of some goods relatively constant.
SSA also announced the largest increase since 1983 of the cap on earnings that are subject to the Social Security payroll tax. The cap is jumping because even though it is linked to the growth in economy-wide wages, it didn’t adjust for that growth last year. That’s because it isn’t allowed to adjust in years when there is no COLA.
Workers will now pay the tax on the first $127,200 of earnings, up from $118,500 in 2016. SSA estimates that close to 12 million of the 173 million workers who pay Social Security taxes will be affected by the change.
Despite this added revenue, elected officials and the public should still be concerned about the imbalance between Social Security’s scheduled payouts and the tax revenues available to pay for them.
The nonpartisan Congressional Budget Office (CBO) currently estimates that Social Security’s trust fund will run dry in 2030, while SSA estimates this will occur in 2034.