If you are currently receiving Social Security benefits, you might notice a slight increase in your monthly benefits in 2017. That’s due to a minuscule 0.3% cost-of-living adjustment. The smallest annual increase since automatic COLAs began in 1975. With exception, of course, to the three years that didn’t have a COLA- 2010, 2011, & 2016. For the average retired worker, it means a $5 increase in monthly benefits in 2017.
However, you won’t even hold onto that raise for too long. That’s because your Medicare Part B premiums are also increasing. On average, retirees were paying $104.90 per month for Medicare Part B. In 2017, they’re be paying $109 per month. Granted, the vast majority of current Medicare enrollees, approximately 70%, will not even pay a 10% increase in their Medicare Part B premiums which is much less than for workers covered under Obamacare or covered under a health insurance plan with their employer. That’s because there is a statutory hold harmless provision. Given that that the 2017 Social Security COLA was only 0.3%, the hold harmless provision limits any increase in Medicare Part B premiums beyond any increase in Social Security benefits in a year. This rule is designed to protect most of the folks on Medicare from paying more for their coverage than their incomes can sustain.
If you are signing up for Medicare for the first time this year, you're going to be asked to pay more. Your standard Part B premium will be $134 per month this year. Higher-income retirees will pay even more.
Retirees are not the only ones being asked to pay more because of their income. Higher-income workers will pay more FICA taxes, as the taxable wage base increases to $127,200 in 2017, up $8,700 from the $118,500 limit that had been in place since 2015.
Social Security recipients who collect benefits before their full retirement age will be able to earn more in 2017 without losing benefits due to excess earnings. In 2017, beneficiaries who are under full retirement age for the entire year can earn up to $16,920 without losing any Social Security benefits, up $1,200 from last year. If they earn more than that, they will forfeit $1 in benefits for every $2 earned over that limit. The earnings limit only applies to wages from a job or self-employment income. But the earnings cap affects anyone who collects Social Security before full retirement age, including retirees, spouses, ex-spouses and survivors.
There is no limit on earnings beginning the month you attain full retirement age, which is currently 66 for anyone born from 1943 through 1954. But that, too, is changing.
Beginning in 2017, the first wave of Americans subject to a higher full retirement age will turn 62, making them eligible for reduced Social Security benefits. Because the full retirement age for someone born in 1955 is 66 and 2 months, the reduction for collecting benefits at the earliest possible age of 62 is slightly higher than someone whose full retirement age is 66.
Individuals who turn 62 this year can collect 74.2% of their full retirement age benefit, compared to 75% for someone whose full retirement age is 66. A spousal benefit is worth just 34.6% of a worker's primary insurance amount if claimed at age 62, compared to 35% for someone whose full retirement age is 66. The full retirement age will gradually increase by two months per year until it reaches 67 for those born in 1960 and later.
Of course, please remember that some of the figures mentioned in this article are averages & may be different than your actual benefit/costs. You can learn more about your benefits at www.SSA.gov & www.Medicare.gov.
About the Author:
Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.