The biggest Social Security change in 2018 is flying under the radar

For tens of millions of Americans, Social Security is a financial lifeline that they simply couldn't live without. Data from the Social Security Administration finds that of the more than 42 million retired workers currently receiving a monthly stipend, a third count on their check for at least 90% of their income, with 62% as a whole relying on Social Security for at least half of their income.

For these beneficiaries, no month on the calendar is seemingly more important than October, which is when the SSA releases its inflationary updates to a number of key figures that pertain to both workers and retirees. In 2018, Social Security will certainly look a bit different for most people.

Social Security changes for retirees and workers in 2018

For retired workers, the disabled, and survivors, a 2% cost-of-living adjustment (COLA) is headed their way. COLA is nothing more than the inflation-adjusted "raise" that beneficiaries receive most years. Though a raise of 2% might sound somewhat pedestrian (and, historically, it is), this will be the largest bump in benefits for Social Security recipients in six years. Refinery and drilling platform shutdowns tied to hurricanes Harvey and Irma, which drove up gasoline prices, are a big reason for this increase.

Best places to live on a Social Security check
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Best places to live on a Social Security check


Springfield, located in the southwest corner of Missouri, is among the most affordable cities to live when you have $0 saved for retirement. According to Numbeo's Cost of Living Index for 2017, the rent in Springfield is less than 19 percent of that in NYC while the general cost of living plus rent is 41.09 percent.

The average Social Security check each retiree receives here is $1,300.51. That's good news considering you can get a downtown one-bedroom apartment for around $507, or $450 elsewhere.

Best of all, Springfield is a lively town close to recreational areas. Springfield/Greene County has over 100 parks, including Lake Springfield Park, which is perfect for kayaking and canoeing. And you'll find lots of bike paths in and around town as well as lakes and streams popular with fishermen. 

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When you're trying to make the most of your Social Security check, look no further than Athens. The city of some 200,000 residents has a cost of living that is 6.2 percent below that of the national average, according to Forbes. Your cost to rent in Athens is less than one-quarter than what you would pay in NYC and, when you factor in groceries, transportation, restaurants and other day-to-day expenses, you'll live in Athens for just 43.88 percent of what you'd pay in the Big Apple.

Since the town is the home turf of the University of Georgia, you'll find lots of low-cost eateries as well as cultural activities. The art and music venues are impressive. Athens is also known for its annual bicycle races called the Twilight Series.

So, how much does a one-bedroom apartment cost in Athens? Count on paying a little over $700 for a downtown apartment and around $600 elsewhere. Considering the average monthly Social Security retirement check in Georgia is $1,304.44, you'll have plenty of cash leftover after bills.

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If you prefer year-round warm weather, consider Tucson, a large city in Arizona's Sonoran Desert. Tucson's cost of living is delightfully low, with rent prices less than a quarter of NYC rent. You can find a one-bedroom apartment for $578 if you don't want to be downtown — $686 if you do.

When you include rent, groceries and other living expenses, a Tucson resident spends only 45.17 percent of the amount spent by NYC dwellers. And, the typical Social Security retirement check here is above the national average, at $1,343.51.

Over half a million people live in Tucson, and the city continues to grow. The downtown is compact, with a small historic district. Nearby you'll find the University of Arizona. Tucson is an attractive city surrounded by several high, forested mountain ranges, including the Santa Catalina Mountains.

See: Here's What an Average Apartment Costs in 50 U.S. Cities 

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Mobile is another city with a cost of living significantly lower than the U.S. average. Move here for retirement and you'll pay just 24.27 percent of NYC rental prices. That means you can get a one-bedroom apartment for between $600 and $650 just about anywhere you live in Mobile.

Once you include food, transportation and other expenses, you'll be paying less than half — 46.28 percent — of NYC prices. But, average Social Security checks are a little lower than what'd you expect, at $1,285.68.

Mobile is located on the Gulf Coast and has a rich history as an antebellum seaport. Today, it remains a major port and is sometimes compared to New Orleans — except a little more laid back.

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Rent in Shreveport comes in at a monthly cost between $700 and $740, depending on your proximity to the city center.

Unfortunately, the average Social Security benefit in Louisiana is just $1,212.05, the lowest of any state, according to a GOBankingRates study on the best and worst states to retire rich.

Still, your cost to live in Louisiana is just 47.08 percent of that in NYC. Meanwhile, Shreveport is a cultural hub in the tri-state area of Arkansas, Louisiana and Texas.

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Billed as "The Biggest Little City in the World," Reno living comes with a lot perks, most notably a cost of living that's less than 50 percent of NYC. Rent alone is just 31.04 percent the cost of NYC dwellings. Surprisingly, it's more expensive living outside of the downtown area. You'll pay around $750 for a one-bedroom apartment in the city center, but closer to $813 outside of it.

Reno's average Social Security check is $1,313.43, and you'll have plenty to do with your leftover money. Truckee River provides access to rafting, kayaking and fishing. There's also tons of festivals happening in Reno at any point in time, like the Reno River Festival and Artown Festival.

Be Prepared: 5 Social Security Changes to Watch for in 2017 

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Albuquerque is New Mexico's largest city, and it's one of the cheapest places to live. Its cost of living is similar to Shreveport, with rent near the city center at about $760, or about $640 outside the city.

In 2016, U.S. News & World Report named Albuquerque one of the 50 best places to live in America. It described this desert city's appeal as "a blend of modern times and Native American history." Albuquerque has a diverse population and is perhaps best known for its annual International Balloon Fiesta.

You'll also enjoy Old Town, where you'll find numerous restaurants, museums and galleries. One downside for retirees: The average Social Security retirement check received by folks living in Albuquerque is $1,227.11. So, be prepared when your check arrives

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In a rating of the top states for businesses in 2016, CNBC named Oklahoma the sixth-best state for cost of living. Oklahoma City, the state's largest city, has rent costs between $625 and $850. Between rent, groceries and utilities, you can expect to spend just 47.93 percent what you'd spend in NYC, a comparable amount to living in Reno or Mobile.

Average Social Security benefits come in at $1,277.14 — not the best, but also not the worst.

While you may not think of Oklahoma City as offering a stunning cityscape, National Geographic named it a must-see location in 2015. It gave shout outs to its community boathouse, new West River Trail and rebuilt MidTown.

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Rent is low in Fort Wayne, about 22.73 percent of what you might pay in NYC. Retirees in this city can find a one-bedroom apartment for around $631, making it an affordable place to live. In fact, the cost of living in Indiana is an estimated 16 percent lower than the national average, according to data from AreaVibes. And Niche, which ranks and review neighborhoods, named Fort Wayne the cheapest city to live relative to income.

Average Social Security retirement benefits are a healthy $1,379.93. Once there, you'll enjoy the Foellinger-Freimann Botanical Conservatory, historical museums and the Black Pine Animal Sanctuary, among other attractions.

Up Next: 20 Unsettling Things You Need to Know About Social Security 

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Of course, not everyone will be eligible for a 2% raise. A majority of seniors who've been protected by the hold harmless clause could see part, or all, of their COLA head to Medicare Part B premiums. Hold harmless is the rule that protects folks who are enrolled in Social Security and Medicare, and who have their Medicare Part B premiums deducted from their monthly Social Security payout, from having their Part B premiums rise at a faster percentage than their Social Security COLA. 

Workers also got some big news with the SSA announcing inflationary increases to the maximum taxable earnings cap.

Social Security's 12.4% payroll tax on earned income is responsible for generating about 87% of the program's revenue. In 2017, earned income between $0.01 and $127,200 was subject to Social Security's payroll tax. In 2018, the maximum cap has increased $1,500 to $128,700.  Ultimately, depending on whether the well-to-do are employed by someone else or self-employed, this could mean an extra $93 or $186 in taxes owed in 2018.

This under-the-radar Social Security change is arguably the biggest next year

In spite of a laundry list of changes to the program in 2018, it's a nonadvertised change that's perhaps the biggest of all. Namely, the full retirement age (FRA) is rising by another two months to 66 years and four months for newly eligible retirees born in 1956. Your FRA is determined by your birth year, and it's the age at which the SSA deems you eligible to receive 100% of your retirement benefit. 

Back in 1983, a host of amendments were passed that represented the last major overhaul of Social Security. Among those amendments was an increase to the FRA schedule that would gradually increase it from 65 to 67 years over a four-decade span. This increase was designed to take into account lengthening life expectancies. Beginning in 2017 and extending through 2022, the FRA is being increased by two months per year. Thus, newly eligible retirees in 2018 will have to wait an additional two months, until age 66 years and four months, if they want to receive 100% of their retirement benefit.

What you don't know can cost you valuable retirement income

While a two-month increase in FRA doesn't sound like much on paper, it can certainly compound over time if you're unfamiliar with how your claiming age can impact your monthly payout. For those unaware, unclaimed Social Security benefits grow by approximately 8% a year, beginning at age 62, the point where you're eligible to receive benefits, and stop at age 70. In simple terms, if you sign up for benefits at any point between age 62 and prior to reaching your FRA, you'll accept a permanent reduction in your payout. Conversely, you can receive even more than 100% of your retirement benefit if you wait until after your FRA, or up till age 70, before claiming benefits.

For example, two years ago, a person born in 1954 could enroll at age 66 and receive 100% of their retirement benefit. For someone born in 1956, enrolling at age 66 means only receiving 97.8% of your full retirement benefit. Considering the average worker makes $1,371 a month, this 2.2% decrease means $30 less a month, or around $360 a year. If you live for 20 years after filing your claim at age 66, which is almost par for the course according to data from the SSA, you could be ceding more than $7,000 in lifetime benefits, not including annual COLAs, just for claiming four months earlier than your FRA. That's a big deal.

Long story short, if you were born in 1955 or after, your FRA is on the rise, and for those born in 1960 or later, your FRA will cap at age 67 in 2022. This means you'll have a decision to make: wait longer to receive 100% of your retirement benefit, or claim earlier and accept a steeper permanent payout reduction than in years past. Though that decision isn't always easy, it's an extremely important one, which is why this unadvertised change is probably Social Security's biggest in 2018.

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