Column: 3 things that will change with Social Security in 2017


Commentary by Joel Harris


Here are a few notable changes to the system to be aware of as you plan for your future.

1. More earnings subject to Social Security Tax – A majority of workers pay 6.2 percent of their earnings into the Social Security system, and their employers pay the other 6.2 percent, for a total of 12.4 percent until their salary reaches a certain level.  For 2017, the maximum taxable earnings figure will increase from $118,500 to $127,200.  This means more of your annual paycheck will be subject to Social Security taxes.

2. Increased Earnings Limit – It is important to be aware of the earnings limit if you intend on filing for benefits early.  The earnings income limit rule will increase from $15,720 in 2016 to $16,920 in 2017.  Social Security beneficiaries who earn more than $16,920 will have $1 in benefits withheld for every $2 in earned income over the limit every year until they reach 65.  For those who will turn 66 in 2017 the earnings limit increases to $44,880, and the payment reduction declines to $1 withheld for every $3 earned in excess of the earnings limit.  Once a beneficiary reaches their full retirement age, they are no longer subject to this earnings limit test and can make as much money as they’d like without having any of their benefits withheld.

3. Spousal Benefits – Anyone under the age of 62 by the end of 2015 no longer has the choice of which benefit to elect when they reach full retirement age.  Regardless of their age and when they elect to take benefits, they will be “deemed” to have filed for the highest benefit.

For anyone over the age of 62 at the end of 2015, you will be grandfathered under the old rules and will have the ability claim only spousal benefits, if eligible, if you wait until you reach full retirement age.  The key phrase in that sentence is “if you wait until full retirement age”.  If you file before FRA, then you will no long be able to take advantage of filing for a spousal benefit only.