It is the classic case of “I have some good news and I have some bad news. Which would you like to receive first?” The good news for Social Security recipients is that there will be a cost-of-living adjustment (COLA) for the first time since 2015. The bad news is that the COLA increase is a meager 0.3% for 2017.
The average monthly Social Security benefit for a retired worker was $1,341 a month in January of 2016. A 0.3% COLA increase means the average retiree will receive an extra $4.02 a month in Social Security benefits in 2017. While an extra $4.02 a month probably will not go very far for most retirees, most retirees were protected from a 15% increase in Medicare part B premiums.
The reason so many retirees will not face a 15% increase in Medicare part B premiums this year is the hold harmless provision in the Social Security program. For individuals who have their Medicare Part B premiums deducted directly from their Social Security checks, which is the case for roughly 70% of Medicare part B enrollees, any increase in part B premiums is limited to the increase in Social Security benefits from the annual COLA via the hold harmless provision. With the hold harmless provision the remaining enrollees, roughly 30% of Medicare part B participants, are forced to absorb the full cost of the premium increase for the entire Medicare program.
Other changes are in store for Social Security in 2017, as well. The maximum amount of earnings subject to Social Security tax will increase to $127,200 in 2017.
For those choosing to claim Social Security benefits who are younger than their full retirement age (according to Social Security), the earnings limit increases to $16,920 in 2017. Social Security will deduct $1 in benefits for every $2 earned over $16,920 for early claimants.
The earnings limit for those turning 66 in 2017 increases to $44,880. Social Security will deduct $1 in benefits for every $3 earned over $44,880 until the worker turns age 66.
Be sure to call our office at 419-878-3934 as you weigh your Social Security benefit options, or if you have questions in general about how Social Security fits into your retirement income strategy.