With the New Year, many people have questions concerning the 2017 changes to Social Security. The IRS publishes these annual changes and we prepare to advise our clients as to how the changes will affect them.

What follows is what we believe are the most important financial benefit changes that people should be aware of:

1. In 2017, the SS income rate increased by only .3%. People often refer to this meager raise as a COLA or cost of living adjustment. Why is this important? This means that the average retired couple’s monthly SS retirement benefit increased from around $2,254.00 last year to about $2,260.00. Some folks depend on increases based on trends from the past. Know the current numbers to best plan for the years to come.

2. The monthly maximum benefit for the majority of people receiving SS payments increases by $48.00 to $2,687.00 per month. This means some folks will pocket an extra $576.00 just due to the monthly increase.

3. This one is specifically for those disabled and collecting disability benefits in 2017. The changes happening within the disability system are far too numerous for this post, however, I do want to note one important change. Anyone on SSD/SSI benefits is familiar with the term “substantial gainful activity” or “SGA”. Well, in 2017, the SGA rate for blind persons raises to $1,790.00 per month, up $10.00. SSI rates are up as well, although not by much. These rates go from $735.00 per individual and $1,103.00 for qualifying couple (before adding in the state supplement). A raise is a raise though, right?

4. Good news for folks who are collecting their SS retirement benefits while still working! If you elected to start collecting retirement benefits before your full retirement age, you can earn more money without facing penalties in 2017. That raise jumps from a max earnings of $1,310.00 in 2016 to $1,410.00 per month in 2017. If you waited to start collecting your retirement until your full retirement age, you can earn $3,740.00 per month before facing penalties. That is way up from the cap of $3,490.00 seen in 2016. Want even better news? If you were able to wait until after reaching your full retirement age to draw these benefits, there is no cap whatsoever.

5. This one applies to the working class that is currently paying into the system. I should note that we may see a change in these figures with a new president in office. However, presently, the amount of income subject to Social Security taxes has increased for those making between $118,500.00 and $127,200.00. If your income falls within this bracket, you will note that while in 2016, you only had to pay the 1.45% income tax for Medicare, in 2017, you will be required to pay the full 7.65% for both SS, as well as, Medicare. Self-employed folks who are required to pay both the employer and employee portions of this tax will pay 15.3% on all income up to the max income listed above. Making over 200K or making 250K between yourself and your spouse? Then you will also have to pay an additional .9% Medicare tax.

Yes, they do. If you are approved for Social Security Disability (SSD) benefits, you are automatically enrolled in Medicare once you have been found qualified for SSD benefits for a period of two years. The SSA will determine what date you became disabled, so this wait can vary, depending upon how long it has been since the date of onset (of your disability) is determined.

With that said, there are two parts to Medicare that you are enrolled in, once the two years has passed. The first is called Part A. This is essentially hospital coverage. It helps pay for in-patient hospital bills and post-hospital care. This coverage is free. The second part is called Part B. It is the basic medical insurance coverage for things like doctor visits and other medical services. Unlike Part A, this coverage is only available if you pay a premium for it. So, it’s optional.

Note: You may have also heard of other optional Medicare supplements such as Part C (Medicare Advantage) and Part D (Prescription Drug Coverage). Concerning Part C, there are a myriad of separate plans available through private companies if a person wishes to add this coverage. Part D is a little different in that you can enroll for this added supplement during the SSA’s Medicare Part D open enrollment periods. For more on all of this, visit www.medicare.gov.

Now, Supplemental Security Income (SSI) is a different ballgame altogether. Recall that SSI is a need based benefit for those who have very limited income and assets and who did not pay enough into the system to qualify for Social Security Disability benefits. As such, these folks do not get Medicare coverage along with their SSI benefit. Instead, they can utilize Medicaid benefits. Most of the people who qualify for SSI are already utilizing Medicaid benefits, therefore nothing significant changes concerning their medical coverage. Visit www.medicaid.gov for more information concerning Medicaid benefits.

This is a tough question to answer for two reasons; the answer is different for different types of benefits and the answer can be very personalized in some situations.

Concerning SSD benefit rates, the amount of your monthly benefit depends upon how much you worked and what you were paid for that work. Similarly, if a person qualifies for disabled widow’s or widower’s benefits, his/her benefit rate will be based upon what his/her deceased spouse made while he was working and the length of time he/she worked.

If a person is qualified for disabled adult child benefits, his or her benefit rate is dependent upon what his parent earned while working and how long he/she worked.

With that said, the benefit rates for SSI are very straightforward as they are set and not dependent upon one’s work history and earnings or lack thereof. Recall that SSI is the disability welfare program, so these benefits are often much lower than those who can qualify for SSD. In the state of California, the Federal monthly benefit rate for SSI is $733 per individual and $1,100 per eligible couple. To this, is added a California supplement. Note that these amounts do go up via cost of living adjustments.

In cases where a child is qualified for children’s SSI benefits, calculating the appropriate benefit rate is far more complicated. Although the standard monthly benefit rate of $733 (for SSI) applies, there are a whole host of factors that play into calculating deductions on this type of benefit. The earned and unearned income of one or both parents or step-parents is considered when determining deductions that should be taken. Whom the child lives with, how many non-disabled children reside in the household and several other factors are considered.

With all of that said, remember that ongoing benefits are only half the award. You could also get awarded back benefits which can really add up. I have seen people get $80,000.00 back benefit checks. In SSD type cases, back benefits can be awarded up to one year prior to when the claim for benefits was filed, should you be deemed disabled at a prior date. There is a five month waiting period in some situations, but that is an issue for another blog. Concerning SSI, you can only be awarded back benefits until the date that your claim for benefits was filed.

Now that we have covered that, understand that the SSA does take credit against your monthly benefits for some other forms of income. This can get really complicated and any credits taken need to be reviewed by an accredited professional. Make sure you are in good hands!

This is the single most asked question that I get from clients. People often do not know that the Social Security Administration offers different programs for disabled persons, based on what you paid into the system and your asset/income levels. That is really the difference in a nutshell. When you meet with our firm, we will take a careful look at your case and both benefits to determine which you may qualify for and which you should pursue.

Essentially, Social Security Disability (often called Title II benefits) are benefits for those who have paid into the system over a sufficient and recent enough period of time. It is a form of insurance for those who are employed and contributing to the Social Security system. Generally speaking, if you have worked at least five out of the last ten years, you are probably “insured”. Under this benefit, a disabled person’s spouse and children may also collect dependent benefits in most situations.

The other benefit is known as the Supplemental Security Income (or Title 16) benefits. This benefit has no requirements concerning work history. You do not have to have ever worked or paid a dime into the Social Security system to qualify for this benefit. However, you must have very limited income and assets to qualify for this benefit. It is a form of welfare benefits for the permanently disabled.

There are a myriad of important differences between these two benefits, but now that the basics have been covered, we can discuss a few of the additional, most important differences.

1. The benefit amounts for each system are very different. Your benefit rate for Social Security Disability (SSD) is based upon what you paid into the system. You can call the SSA at 800-772-1213 and request information concerning your rate of pay or visit their website at ssa.gov to create an account and track your rate of pay that way. For Supplemental Security Income (SSI) recipients, the rate of pay is a set amount of $733.00 per individual or $1100.00 per eligible couple. To this amount, the state supplement is added. Note: These amounts are examples, generally speaking. If you are blind or receive some form of income or assistance, these amounts can be different).

2. Medicare v. MediCal. If you qualify for Social Security Disability (SSD), you will become eligible for Medicare after two years (in most cases). You will often pay premiums out of your SSD benefit monies. On the other hand, if you qualify for SSI, you will not be entitled to Medicare, instead you would receive MediCal.

3. Concerning SSD, your assets, savings, etc. are not of any consideration. They simply do not matter. For SSI, you must have very limited income and assets. The SSA has strict rules concerning this issue and therefore your particular situation will be thoroughly explored by this firm.

4. Children can collect SSI. If you are very poor and have a child who became disabled before age 18, your child may qualify for SSI benefits. There are no SSD benefits for children.