Let’s start with the good news for retirees:
Cost of Living Adjustment
Beginning in January 2017, Social Security beneficiaries will see their benefit amount increase by .03 percent due to a cost-of-living adjustment. For most beneficiaries, monthly payments will increase by approximately $5.00.
Earning Limit Increase for Retirees
There’s good news for retirees over the age of 66 who continue to earn incomes while collecting Social Security benefits. Social Security changes in 2017 allow retirees who have attained full retirement age, but who continue to work while receiving benefits, to earn an unlimited income without being subject to withholding rules. For any individual over the age of 66 who was previously subject to withholdings, benefit checks will increase to give credit for those prior withholdings.
For individuals who turn 66 in 2017, the earning limit increases by $3000 to $44,800. These individuals will be subject to $1 withheld in benefits for every $3 earned over the income limit.
Retirees age 65 and younger will be able to earn an additional $1200 income without being subject to earning limits. The earning limit for these individuals rises to $16,920. Retirees earning more than that amount will see $1 in benefits withheld for every additional $2 earned.
In 2017, individuals retiring at the full retirement age of 66 will see a maximum possible payout increase of $48. That brings the potential full benefit amount to $2,687. For individuals who choose to wait to collect social security until after age 66, higher monthly payments may be possible.
These modest increases in monthly benefit amounts are good news for most retirees. Additionally, Social Security rule changes take effect in 2017 that will impact benefit checks to some retirees and future beneficiaries.
Say Goodbye to Double Claims for Some Retirees
Individuals turning 62 on or after January 2, 2016 who are part of a dual-income couple will not be allowed to switch between spousal payments worth half of the higher earner’s benefit amount, and their individual Social Security benefit. Instead, married couples will automatically receive the higher benefit amount when they enroll in Social Security.
Dual-earning married couples aged 66 and older will have the option to initially collect spousal payments worth half of the higher earner’s benefit amount, thus delaying their own retirement age and increasing the amount they will be eligible to receive. Later, a spouse can switch their payout to reflect their own work record.
Suspended Payments. Under a new rule, family members of individuals who have chosen to suspend their Social Security payments until age 70 will not be eligible to receive Social Security payments that are based on that individual’s work record during the period of suspension. This rule will apply to all family members except divorced spouses who receive a divorced spousal benefit. Suspended payments are popular with some retirees as a way to cash in on higher monthly payments in exchange for waiting longer to begin receiving benefits.
An increase in tax caps takes effect in 2017 that may affect as many as 12 million working Americans. Due to an increase in average wages, Social Security tax caps on the maximum taxable earnings will increase from $118,500 to $127,200. Any earnings in excess of $127,200 will not be taxed in 2017 and will not figure into future retirement benefit amounts.