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4 Big Legal Changes That Will Hit Your Wallet in 2018

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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With all eyes on the GOP’s sweeping plans for tax reform, it’s easy to lose sight of other policy changes that could have an impact on your wallet.

In 2018, there are at least three key policy changes to keep tabs on — adjustments to Social Security benefits, 401(k) contribution limit changes, and the preservation of one of the year’s most controversial financial rules.

Here’s what you need to know:

More Social Security benefits

For Social Security beneficiaries, there is a lot to be excited about in 2018.

The cost-of living-adjustment, which determines the amount of money people receive from the system, is rising by 2 percent, the largest increase in five years. This means a growth in benefits for the more than 61 million recipients currently who currently utilize Social Security in America.

Additionally, the maximum payout—which is the amount you can receive once you’re eligible for 100 percent of your benefits—is also increasing, with the figure growing from $2,687 per month to $2,788 per month.

Greater 401(k) contributions

Saving for retirement will also be a little easier in the coming years, as the Internal Revenue Service announced that the annual limit for 401(k) contributors will increase by $500 in 2018.

Previously, anyone participating in a 401(k) or 403(b) plan, the majority of 457 plans, or the  Thrift Savings Plan could set aside $18,000 per year, but the number will grow to $18,500. To see how much this change might affect your retirement funds, you can use this calculator to track how your 401(k) funds will grow over time.

Mandatory arbitration contracts

Earlier this year, the Consumer Financial Protection Bureau (CFPB) issued a regulation banning mandatory arbitration clauses, the often-controversial sections of consumer contracts that effectively prevent customers from filing class-action suits against a company they are doing business with, such as a bank.

However, this law, which was set to come into effect in 2018, has been overturned by Congress, meaning the rule will remain in effect.

Martin Lynch, the compliance manager and director of education for Cambridge Credit Counseling Corp. in Agawam, Mass., says the repeal of the CFPB’s rule is a major defeat for consumers because forced arbitration is often used to scare customers out of taking action against the corporate world.

“That’s not fair, almost by definition,” says Lynch, who is also a member of the board of directors for the Financial Counseling Association of America. “It’s why the concept of consumer protection exists in the first place.”

Still to be determined: The GOP tax bill

It seemed as though 2017 might be yet another slow year for tax legislation. Then earlier this month Republican lawmakers moved to pass what is could be the biggest American tax overhaul since the 1980s.

While the U.S. House of Representatives and Senate still have to agree on a singular version of the new bill, which likely include close to $1.5 trillion in total tax cuts — $900 billion of which will be for businesses alone — they’re rushing to meet President Donald Trump’s Christmas deadline.

“If any or all of the proposed changes get enacted, we will have a lot to be concerned with,” says Cindy Hockenberry, director of tax research and government relations for the National Association of Tax Professionals.

So how will the Republican tax bill—in its current form—most affect consumers? Next year, not very much. The plan’s changes, which technically go into effect on Jan. 1, 2018, will be mostly marginal until 2019 because Americans will mostly be able to file their taxes in April under the current rules.

Being aware of these changes can help you plan in advance because filing taxes in the coming years might be extremely different, depending on your income bracket and your usual deductions. While the bill—officially named the Tax Cuts and Jobs Act—is not yet finalized, here are the parts of the bill’s current form that consumers are likely to feel the most:

  • Your income tax bracket could change: The House version of new law would reduce the number of standard tax brackets from seven to four, meaning many Americans would pay a new percentage of their income in 2019. You can check out this chart of the proposed percentages to see how your taxes might change.
  • Your state and local tax deductions will probably go away: The Senate plan would eliminate the State and Local Tax (SALT) deduction. This means that if you typically itemize your taxes—instead of just taking the standard deduction— you will be unable to write off taxes paid to state and local governments on your federal filing.
  • You will no longer be able to deduct a personal exemption: Currently, you can take a $4,050 “personal exemption” from your return that doesn’t count toward your taxable income. Under both the House and Senate bills, this option would disappear, however the standard deduction you can take each year would almost double—increasing from $6,350 to $12,200 under the House bill.

Hockenberry, who is based in Appleton, Wis., says the most important part of the plan is its proposed elimination of the personal exemption and a number of itemized deductions. Some Americans might have to pay more each year, she added, because the increase in the standard deduction might not be enough to make up for these changes, causing some consumers’ taxable income to grow.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Here’s How to Find Out How Much Social Security Income You’ll Receive

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

At what age will you retire? How much can you expect to receive each month when you do? These are important questions even if you are decades away from retirement, and there’s an easy way to get answers anytime. We’re going to show you how to get your Social Security benefits statement online and what to do with it once you’ve got it.

A little background:

Depending on your age, you may remember getting a printed Social Security benefits statement in the mail. Prior to 2011, the Social Security Administration (SSA) mailed statements to all workers every year. Those annual mailings were discontinued in 2011 as a cost-saving measure. The following year, the SSA made the statements available online, but their decision caused a bit of an uproar. Despite the agency’s outreach campaign, far fewer people registered for an account than there were eligible workers. So in 2014, Congress required the agency to resume sending printed statements every five years to workers age 25 and older who hadn’t registered for an online account.

That schedule remained until earlier this year when the agency announced that due to budget restraints, paper benefit statements will only be mailed to people who are 60 or older, have not established an online account, and are not yet receiving Social Security benefits. Simply put, don’t expect to get a printed statement anytime soon.

How to get your Social Security benefits statement

Accessing your Social Security benefits statement online is pretty simple, as long as you have an email address and can provide some basic identifying information.

First, go to ssa.gov/myaccount and click on “Sign In or Create an Account.”

If you’ve never created an online account with the SSA, you’ll click on “Create an Account.” If you’ve set up an account before, you won’t be able to create a new account using the same Social Security number. If you’ve forgotten your username or password, the SSA website offers tools to help recover them.

When you select “Create an Account,” the site will lead you through a few questions to verify your identity. You’ll need to provide personal information that matches the information on file with the SSA as well as some information matching your credit report.

Ryder Taff, a Certified Financial Adviser with New Perspectives, Inc. of Ridgeland, Miss., helps many of his clients set up Social Security accounts and says the questions often have to do with past residences or vehicles that may have been registered in your name.

If you have trouble setting up your account online, you can call the SSA for help at 1-800-772-1213.

Information in a Social Security benefits statement

Your Social Security benefits statement provides several valuable pieces of information:

  • A record of your earnings, by year, since you began having Social Security and Medicare taxes withheld.
  • Estimated retirement benefits if you begin claiming Social Security at age 62, full retirement age, or age 70.
  • Estimated disability benefits if you became disabled right now.
  • Estimated survivor benefits that your spouse or child would receive if you were to die this year.

Here’s a sample of what your benefits statement will look like:

Keep in mind that the estimated benefits shown are just that — estimates. The amounts shown are calculated based on average earnings over your lifetime and assume you’ll continue earning your most recent annual wages until you start receiving benefits. They are also calculated in today’s dollars without any adjustment for inflation. The amount you receive could also be impacted by any changes enacted by Congress from now until the time you retire.

What to do with your Social Security benefit statement

It’s a good idea to check your earnings record for errors once per year. It’s not uncommon for earnings from certain employers or even all of your earnings from an entire year to be missing, and you’ll want to get that corrected right away because benefits are calculated on your highest 35 years of earnings. “Any missing years will be just as damaging as a zero on a test was to your GPA,” Taff says. “Gather your documents and correct ANY missing years, even if they aren’t the highest salary. Every dollar counts!”

If you do spot any errors, grab your W-2 or tax return for the year in question and call the SSA at 1-800-772-1213. You can also report errors by writing to the SSA at:

Social Security Agency
Office of Earnings Operations
P.O. Box 33026
Baltimore, MD 21290-3026

Reading your statement is also a good reminder of how much you need to save for retirement outside of Social Security. Chances are, you won’t be happy living on just your Social Security income in retirement.

The good news is, the longer you delay taking your benefit, the higher your annual benefit will be. You can begin taking Social Security retirement benefits at age 62, but your payments will be smaller than they would be if you waited until full retirement age (FRA). Currently, your annual benefit increases by 8% for each year you delay taking your benefit from FRA until age 70.

Colin Exelby, president and founder of Celestial Wealth Management in Towson, Md., says that using your Social Security benefits statement can be particularly useful for retirement planning for couples. “Depending on your age, health, family health history, and financial situation there are a number of different ways to claim your benefits,” he says. “Each individual situation is different, and many couples have different views on the decision.”

If you are nearing retirement, you can use your benefits statement to work with a financial adviser to help you maximize total benefits, or run through various scenarios using a free online tool like the one provided by AARP.

Setting up your Social Security account is simple, free, and helpful for retirement planning, but it’s also a good security measure. It’s impossible to set up more than one account per Social Security number, so registering your account is a good way to prevent identity thieves from establishing an account on your behalf.

Take the time to set up your Social Security account and find out how much you might be entitled to receive in benefits. It could help you feel more empowered to take charge of your retirement plan.

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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Should You Take Social Security Benefits at 62?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Should You Take Social Security Benefits at 62?

The vast majority of workers choose to receive their Social Security benefits as soon as they turn 62. And they could be leaving a lot of money on the table. In fact, nearly three-quarters of the 39 million retirees in the U.S. are receiving reduced benefits because they began taking Social Security before they reached full retirement age, according to the Social Security Administration’s 2015 Annual Statistical Supplement.

In fact, you’ll only receive 75% of your benefits if you start taking Social Security at 62. For every year until you reach “full retirement age” (66), the greater your benefit check will be. The chart below shows you exactly how much your benefit will be affected by electing your benefits early.

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But decisions like this are rarely cut and dried. If you’re younger than 62 and contemplating when you should elect your Social Security benefits, we’re going to discuss the factors you should consider first.

3 Reasons You Should Take Social Security Benefits at 62

The Social Security retirement benefit is a bit of misnomer because you don’t actually have to be retired to receive the benefit. Under certain circumstances, electing your Social Security benefit at 62, or any other time before full retirement age (66), could be the right decision for you.

  1. You need the income to meet your basic daily needs. When considering whether or not you should begin receiving Social Security benefits at age 62, look at your budget. Since Social Security will effectively serve as a paycheck, think about whether or not you actually need the additional income.
  2. You don’t have longevity in your family. Nobody wants to leave money on the table. If you don’t have longevity in your family or simply expect your lifespan to be shorter than average, it is worth considering taking your benefits early. Just keep in mind that upon your death, however, your spouse will receive a lower survivor’s benefit than he or she would have if you had waited.
  3. You need to be retired. There are a host of indications that it is time to retire. If you’re realizing one or more of them, but your retirement savings are not enough to sustain your lifestyle, electing your benefits at 62 could be a wise decision.

3 Reasons to Wait to Take Social Security Benefits Until After Age 62

The most common reason someone will tell you to wait until full retirement age is that your annual benefit is reduced if you take it sooner. If you elect benefits at age 62, expect to receive a 25% smaller benefit that you would receive at age 66, for the rest of your life. In addition to the downside of a reduced benefit, think about how these factors apply to your life:

  1. You can afford to wait. If your budget does not rely on the additional income that will be provided by Social Security, your patience will be handsomely rewarded. Your benefit amount increases with each year you wait, up until you turn 70.
  2. You’re still working and making too much money. “Too much money” sounds quite relative, but in terms of Social Security, individuals who elect benefits before full retirement age will have their benefits reduced by $1 for every $2 earned over $16,920. For people older than full retirement age, but younger than age 70, benefits will be reduced $1 for every $3 earned over $44,880.
  3. You will get a larger benefit if you wait.
  1. You’re rewarded for your patience in two ways, and the first is through earnings alone. Your Social Security benefit is determined by the 40 highest-earning quarters of your work history. So, if you’re 62 or older and earning more money each quarter, it could mean a larger monthly benefit when you eventually elect Social Security.
  2. Whether or not your earnings increase during the final quarters of your working years, the Social Security Administration will also reward you for waiting to take your benefit until age 66 or later.

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3 Ways to Boost Income and Avoid Taking Social Security Benefits Early

The Annual Statistical Supplement does not discuss why so many people elect benefits before full retirement age, but if you are considering an early election of your benefits due to an income need, judge the following first:

  1. Your budget
  1. Can you generate enough monthly savings to offset your Social Security benefit before full retirement age? The benefits of waiting to take your Social Security benefit far outweigh the costs, so if you’re able to apply a short-term solution for a larger, long-term benefit, it could be in your best interest.
  1. If retired, take a part-time job
  • According to the 2015 Annual Statistical Supplement, the average monthly benefit for a retired worker was $1,329. If after assessing your monthly budget, and the deficit you hoped to fill with Social Security is close to or below what your monthly benefit would be, think about a part-time job. Your annual income will likely fall below the threshold for a reduced benefit, and you will avoid a lifelong reduction in Social Security benefits.
  1. Consider adjusting your portfolio to a more income-oriented allocation
  • Disclaimer: This approach should be discussed with a professional. If you have retirement or investment accounts, you have two strategies at your disposal to help generate income:
    1. Take dividends in cash, rather than reinvesting. While this may provide a stream of income, it could also slow the growth of your investments.
    2. Adjust your asset allocation to one that is income-oriented. Then, take the dividends in cash.
  1. Acknowledging that this approach is more complicated than the previous two, it is also a prudent one because it is reversible. The last thing you want to do, as you approach what could be decades in retirement, is permanently reduce any stream of income.

The Bottom Line

Think about the timing of your Social Security like a tattoo. Both can act like a double-edged sword in your life and, for discussion’s sake, are irreversible. Deciding to get a tattoo is not always a good decision; similarly, electing to take Social Security at 62 is not always a smart choice either. However, the reverse is also true, and the only way to know if this choice is right or wrong is to weigh the factors at play in your life against the consequences of your decision.

Aaron Kahn |

Aaron Kahn is a writer at MagnifyMoney. You can email Aaron here

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