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.