Social Security Changes Coming in 2017

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About Planning to Retire

Senior editor Emily Brandon tells you how to get ready financially for retirement and to make your golden years the best they can be.

Social Security beneficiaries will receive a slight increase in their Social Security checks in 2017. There have also been several recent tweaks to the program that change how married couples can collect benefits. Here’s a look at the new Social Security rules for 2017:

A modest increase in payments. Social Security payments will increase by 0.3 percent beginning in January 2017. This cost-of-living adjustment is estimated to result in the typical Social Security beneficiary receiving an extra $5 per month. The average monthly payment for retired workers is expected to be $1,360 in 2017. Retired couples will receive an average of $2,260 per month in 2017, up from $2,254 in 2016. Social Security benefits are adjusted each year to keep pace with inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. Previous cost-of-living adjustments have ranged from zero in 2010, 2011 and 2016 to 14.3 percent in 1980.

A higher tax cap. Most workers pay 6.2 percent of their earnings into the Social Security system, and employers match this amount, until their salary exceeds the taxable maximum. The maximum taxable earnings amount will increase from $118,500 in 2016 to $127,200 in 2017, due to an increase in average wages. Earnings above this amount are not taxed by Social Security or used to calculate Social Security payouts in retirement. Some 12 million workers are expected to pay more into the Social Security system as a result of this change.

Increased earnings limit. Retirees who work and collect Social Security at the same time might have part of their benefit temporarily withheld if they earn too much. The Social Security earnings limit for people age 65 and younger will increase from $15,720 in 2016 to $16,920 in 2017. Social Security beneficiaries who earn more than this amount will have $1 in benefits withheld for every $2 in earned income over the limit. For those who will turn 66 in 2017 the earnings limit increases by $3,000 to $44,880, and the payment reduction declines to $1 withheld for every $3 earned in excess of the earnings limit. However, once you turn age 66 Social Security payments are no longer withheld if you work and receive benefits at the same time and your payments will be increased to give you credit for any part of your benefit that was withheld in the past.

An increase in the maximum possible benefit. The maximum possible payout for someone retiring at his or her full retirement age of 66 will increase by $48 to $2,687 in 2017. However, a higher monthly payment might be possible for those who delay starting payments until after their full retirement age.

No more double claiming. Dual-earner married couples who are 66 or older have the option to collect spousal payments worth half of the higher earner’s benefit amount, and then later switch to payments based on their own work record, which will then be higher due to delayed claiming. However, people who turn 62 on January 2, 2016 or later will no longer be able to claim both a spousal payment and an individual payment at different times. Married retirees will now automatically receive the higher of the two benefit options and can no longer claim both types of payments at different times.

Dependents can’t receive benefits if you suspend payments. Social Security beneficiaries can voluntarily suspend their payments between ages 66 and 70 in order to earn delayed retirement credits that will result in a higher monthly payment when benefits are resumed. However, a new rule that applies to benefit suspensions requested on April 30, 2016 or later will additionally stop payments to family members that are based on your work record during the period of the benefit suspension. However, there is an exception to this new rule for divorced spouses, who can continue receiving a divorced spousal benefit if the ex-spouse suspends his or her retirement benefit.

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