The Cost of Living Adjustment (COLA) for this year is a disappointment, but the COLA is not the only increase in Social Security. There are other changes, but they didn’t get as much media attention as perhaps they should have.
You may think that if you work while collecting Social Security, you will lose your benefits. This is not true for the most of us.
An important fact is that once you reach your Full Retirement Age there is no limit to how much you can earn and receive your full Social Security payment. From age 66 and up, you can work and earn as much as you choose without penalty.
However, if you have not yet reached your Full Retirement Age and earn more than the set amount, there is a penalty. In 2016, the limit was $15,720. In 2017 the limit is $16,920.
The penalty is $1 for every $2 you earn over the limit. That’s half. The important thing is that you can now earn $1,200 more per year without a penalty. That’s a sizeable change for Social Security, and that can be a nice boost to your overall monthly income.
The penalty on that extra $1,200 would have been $600 in 2016. Now you can earn that $1,200 and it won’t affect your payment at all.
Remember, too, that when you earn more, your monthly payment is automatically recalculated and increased to reflect the changes. So, an increase in earnings puts more in your pocket now and may increase your monthly Social Security payment later on.
The earnings cap is the amount of wages subject to Social Security tax. The earnings cap was raised from $118,500 in 2016 to $127,200 in 2017. This means that high-income earners will pay tax on more of their salary.
Middle and low-income workers pay tax on 100% of their earnings, while high-income employees don’t pay anything over the cap. With the max now at $127,200 that’s $8,700 more taxable income per high-income person per year than 2016. This will increase the overall amount in the Social Security Fund, which is a good thing.
Many Americans would like to see the earnings cap eliminated. Then all workers would pay Social Security tax on 100% of their earnings like they do for Medicare. This would also serve to decrease the expected Social Security shortfall predicted for 2034.
The maximum Social Security payment has gone up from $2,639 to $2,687. For those who qualify, that’s an increase of $48 per month. That’s $576 per year.
You must have 40 credits to be eligible for Social Security. You can earn a maximum of four credits per year and will need to work for at least 10 years to get the required 40. The years do not have to be consecutive.
In 2016, you needed to earn $1,260 to receive each credit. In 2017, you need to earn $1,300 for each credit or $5,200 per year.
While earning 40 credits makes you eligible, it is your overall lifetime income that determines your payment amount. The more you earn, the higher your payment amount will be until you reach the maximum of $2,687.
The Hold Harmless Provision says that your Medicare Part B monthly premium cannot go up more than your Social Security cost of living adjustment.
If you currently have your Medicare Part B premium deducted from your Social Security check, your premium cannot rise more than .03%. If you were receiving Social Security in 2015 and paid $104 per month, your payment will go up to $109 per month. If you paid $121.40 in 2016, your payment will go up $5.00.
If you do not have your payments deducted from your Social Security benefit, or are starting to collect this year, you will pay $134 per month. Those with an income higher than $85,000 per year will pay more. The Hold Harmless Provisions may result in $25 savings per month or $300 per year.
Retirement can be a tough time financially. Many of our 65+ community live at or near the poverty level. Don’t be one of them. Get up, read (my book), learn, do everything you can to know what you are entitled to. This is your future. No one will do it for you. Check, double check and make sure you get every penny that’s yours so that you can have the best retirement possible.
How will the changes to Social Security affect you in the coming year? Is there a change that you feel will benefit you in a substantial way? What other questions do you have about Social Security and how benefits are calculated? Please join the conversation.