Proposed social security changes for retirees in 2017
Change is coming to beneficiaries of social security benefits beginning in January 2017. For starters, full retirement age (FRA), the age when you can collect your full benefit, will creep up from 66 to 67 in two month increments over the next six years. This will affect those who will celebrate their 62nd birthday this year or soon after.
If you plan on receiving Social Security benefits at age 62, you may do so still. And, like now, you will be assured a larger check for each month you delay this up to age 70. The difference is that at every age along the line you receive a smaller benefit than you would have received before the increase.
When deciding whether to claim Social Security or work longer this change comes as a significant factor to consider. In order to make the smartest decision about your retirement future, you need to understand all the facts. Speaking with a MyFEDBenefits specialist may just be the best way to ensure a financially secure retirement. Read further to find out how you can get in contact with one of these experts to find out when is the best time to claim Social Security.
For now, here’s what you need to know about this tricky new math:
Increasing the full retirement age means a benefit cut. Those who want to start collecting at age 62 will collect 4 years early if their FRA is 66 and receive 75% of their full benefit, However if their FRA is 67, they are 5 years away from FRA, and that portion drops to 70%. Waiting until age 70 will allow a person to collect 124% of their benefit when the FRA is 67, vs. 132% before.
What is the reason for this change? Life expectancy has been increasing by about one month a year. Without periodic increases in the FRA, Social Security would pay each generation more as a result of longer lives—a financial problem for a system that has to pay for itself over time.
In addition to the FRA adjustment, Social Security benefits will increase slightly in 2017. The 0.3% increase is the smallest annual increase since COLA’s began. For the average retired worker it means a $5 increase in monthly benefits, and this minuscule amount will likely be wiped out by higher Medicare premiums.
Most Medicare enrollees who have their premiums deducted from their monthly Social Security benefits will pay about $109 per month in 2017, up about $4 per month from last year. New enrollees in Medicare, as well as those who pay their Medicare Part B premiums directly, will pay the standard Part B premium of $134 per month this year. Higher-income retirees can expect to pay even more.
Finally, 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. This is a $1,200 increase from last year’s cap. If they earn more than that, they will forfeit $1 in benefits for every $2 earned over that limit.
It’s important to note that this increased earnings limit only applies to wages from a job or self-employment, and not to pensions, investments or other “unearned” income. It affects anyone who collects Social Security before full retirement age, including retirees, spouses, ex-spouses and survivors. In addition, any benefits lost to the earnings cap will be restored at full retirement age in the form of larger monthly benefits. There is no limit on earnings beginning the month an individual attains full retirement age, which in 2017 is increasing from 66 to 67.
All of these changes will mean a significant impact to your financial future. Delaying retirement for a later date may end up being the best route to take, especially if you are the higher earner or a healthy single. However, if you are approaching retirement you may consider retiring earlier, as staying on the job may do surprisingly little to boost your benefit. A long-tenured worker who keeps going until 70 would enjoy a boost of less than 7% compared to someone who retired at 62. This is because your Social Security check is based on your pay in your 35 highest earning years.
For a better understanding of how these new changes affect your retirement, contact MyFEDBenefits today. We can assist you with figuring out when is the best time to claim Social Security, and get your ducks in a row. MYFEDBenefits is available at 877-741-1254 or by email: [email protected].
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