Changes in Social Security benefits for 2017 have been announced. The cost of living adjustment is an increase of 0.3% (an increase of $5 per month for the average recipient). A small increase, but an increase none the less; there was no increase in benefits for 2016.
Social Security taxes are paid by both the worker and the
employer. Each pays 6.2% of earnings (or 12.4% of pay in total) to support the
Social Security system. There is a maximum amount of earnings on which that tax
is paid (the “taxable wage base”); no taxes are paid on earnings above the
taxable wage base. In 2016, the taxable wage base is $118,500. The wage base
will rise to $127,200 in 2017.
Individuals who elect to start taking their benefits
before their full retirement age (66 years or more) have their Social Security
benefit reduced for each dollar of earnings they have over a certain amount.
For each $2 a beneficiary earns above that amount, Social Security benefits
will be reduced by $1. The earnings limit in 2016 is $15,720; in 2017 that amount
increases to $16,920.
What’s Next?
Now that the election is over, President Elect Trump and
Congress will face some challenges with the “entitlement” programs of Social
Security, Medicare, and Medicaid. According to the Wall Street Journal (Wed,
Nov. 9, 2016, pg. A18), those programs account for 10% of the US economy and
that percent is rising. The deficit in 2016 is projected at 3.2% of GDP (in an
economy growing at less than 2%). Medicaid spending has been increasing with
the increased coverage under Obamacare. In addition, the US (and other
developed economies) has an increasing population age. More individuals will
become eligible for entitlement benefits. Our current system is not
sustainable; be on the lookout for more changes to come.
We at Paragon Financial Advisors assist our clients in
evaluating their Social Security options. Please call us to discuss your
specific circumstances. Paragon Financial Advisors is a fee-only registered investment advisory company located in College Station, Texas. We offer financial planning and investment management services to our clients.
