The Social Security Administration (SSA) has released their notes on their changes to Social Security in the upcoming year. After a year of no Cost of Living Adjustments (COLA) in 2016, 2017 does bring an increase but only of 0.3% on average. There will also be some small adjustments for those who are still working while drawing Social Security as well. Lastly and possibly most interestingly, their notes revealed potentially how they will help make up some of the shortfall in the future (Hint: a hidden increase on high earners).
The average Social Security paid monthly is currently $1,335 which will be increased to $1,360 next year. A $5 increase is better than nothing but not a whole lot better. This is the 4th consecutive year of incredibly small increases; past years being 1.5%, 1.7%, 0.0%, and now 0.3%. Their calculation is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and was measured from the 3rd quarter of 2014 to the 3rd quarter of this year.
For those who have reached Medicare age and pay their Part B supplemental through Social Security, there might be some fear that the increase in Medicare premiums could dwarf the COLA in 2017. However, there is a hold-harmless provision that prevents any increase in Medicare to reduce your Social Security benefits and should protect everyone from such an increase.
There will also be a small increase in how much you can earn while drawing Social Security if you take the benefit before full retirement age from $15,720 to $16,920. Again, this only affects you if you are still working and started Social Security early (which we almost always argue against here at Cedarstone).
The last, and maybe the most interesting part of the SSA’s notes was in regards to an increase in the maximum taxable earnings for Social Security. Since Social Security benefits are limited, historically the amount of income they tax is limited as well. The limit will remain but the increase in the maximum will go from $118,500 to $127,200 representing a 7.3% increase which is obviously much larger than the 0.3% COLA. One must wonder if this a way of making up for the projected shortfalls going forward. It would not be a total solution but a way of getting higher earners to pay more in as a potential way to slow the depleting Social Security reserve fund.
Overall there was not too significant of a change from 2016 to 2017, but as always, Social Security is an incredibly important benefit in retirement and we will continue to monitor any trends and changes and how they will impact your retirement. If you have any questions about your Social Security, never hesitate to reach out to one of our advisors. For a link to the SSA updates for 2017, click here.
"2017 Social Security Changes." Social Security Administration." 2016. https://www.ssa.gov/news/press/factsheets/colafacts2017.pdf.