There are six changes coming to Social Security in 2017, the most significant being a slight increase in payments.
Social Security payments will increase by 0.3 percent staring in January. The result of this cost-of-living adjustment is an estimated beneficiary increase of $5 a month, making the average monthly payment for retired workers $1,360 in 2017. Retired couples will receive an average of $2,260 per month, up from $2,254 in 2016. These annual adjustments are designed to keep up with inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers.
There will also be a higher tax cap. Currently, most workers pay 6.2 percent of earnings for Social Security – an amount matched by employers. That occurs until their salary exceeds the taxable maximum, which is increasing from $118,500 in 2016 to $127,200 in 2017, as a result of an increase in average wages. Earnings above this amount are not taxed by Social Security or used to calculate Social Security payouts in retirement. Approximately 12 million workers are expected to pay more into the Social Security system as a result of this change.
The earning limit is increasing for retirees who work and collect benefits at the same time. The earnings limit for people age 65 and younger is going up from $15,720 to $16,920. Beneficiaries who earn more than this will have $1 in benefits withheld for every $2 in earned income over the limit. If you turn 66 in 2017 the earnings limit increases by $3,000 to $44,880, and the payment reduction declines to $1 withheld for every $3 earned in excess of the earnings limit. However, once you hit 66, Social Security payments are no longer withheld if you work and receive benefits at the same time and your payments will be increased to give you credit for any part of your benefit that was withheld in the past.
The maximum possible payout for someone retiring at full retirement age of 66 is increasing by $48 to $2,687. But a higher monthly payment might be possible if you delay starting payments until after full retirement age.
Dual-earning married couples 66 or older have 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, which will then be higher due to delayed claiming. However, those who turned 62 on Jan. 2, 2016 or later 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.
Finally, Social Security beneficiaries can voluntarily suspend their payments between ages 66 and 70 in order to earn delayed retirement credits – resulting in a higher monthly payment when benefits are resumed. However, a new rule applying to benefit suspensions requested on April 30, 2016 or later will additionally stop payments to family members that are based on your work record during the period of the benefit suspension. The exception to this new rule covers divorced spouses, who can continue receiving a divorced spousal benefit if the ex-spouse suspends his or her retirement benefit.