A look at the new Social Security rules for the coming year
Each October, the United States Social Security Administration (SSA) announces the changes to this critical social program for the upcoming year. Here’s a summary of the new rules that may affect Social Security recipients in 2017.
Slight increase in payments. Social Security payments will rise by 0.3 percent beginning in January 2017 to keep pace with inflation. The SSA says that cost-of-living adjustments (COLA) of 0.3 percent average out to an estimated $5 increase per month in 2017 for recipients.
Higher earners pay more. Most workers pay 6.2 percent of their earnings into the Social Security system and employers match this amount, until the worker’s salary exceeds the maximum taxable amount. That maximum amount will increase from $118,500 in 2016 to $127,200 in 2017. This change means that about 12 million higher-earning workers are expected to pay more into the Social Security system.
Maximum benefit is higher. In 2017, the highest possible payout for a person at full retirement age is $2,687, up $48 for 2016. However, those who delay starting payments until after they’ve reached full retirement age (up to age 70) may qualify for higher monthly payments.
Full retirement age rises. The SSA defines “full retirement age” (FRA) as the age at which an individual becomes entitled to full or unreduced retirement benefits. For those born between 1943 and 1954, the FRA is 66. In 2017, the FRA increases to 66 years and 2 months to those born in 1955. This FRA hike will continue each year, reaching 67 years for people born in 1960 or later.
Recipients can earn more. If you are age 65 and younger and you collect Social Security benefits but still work in 2017, you can earn up to $16,920 per year (up from $15,720 in 2016) without having benefits withheld. If you earn more than that annual amount, for every $2 you earn, $1 of benefits will be withheld. If you reach age 66 (full retirement age) in 2017, $1 of benefits will be withheld for every $3 earned above $44,880. At your full retirement age, the SSA recalculates your benefits to give you credit for the amount withheld. Starting at the month you reach full retirement age, Social Security payments are no longer withheld if you work, regardless of your earnings.
No file and suspend. In past years, a beneficiary between ages 66 and 70 could claim and then voluntarily suspend Social Security payments, allowing the beneficiary’s spouse to receive benefits on the beneficiary’s record while the beneficiary’s benefits accrued. Starting in 2017, no one can do this. This new rule does not affect payments to divorced spouses, who will continue to receive the full divorced spousal benefit if the ex-spouse suspends his or her retirement benefit.
No double claiming. Dual-earner married couples who are 66 or older have had 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 (and those payments are higher due to delayed claiming). But people who turned 62 on or after January 2, 2016, 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.