Every year, millions of Americans become eligible to take Social Security benefits, and many jump at the chance to tap into the federal government's retirement program. If you're looking at taking Social Security in 2017, there are some things that you need to know in order to make sure that you make the best possible decision for your own financial situation. With that in mind, here are some of the key aspects of Social Security for 2017 that you'll want to keep in mind.
Full retirement age is going up
2017 will be the first year in more than a decade that the full retirement age will go up for those who first become eligible for Social Security. Those who were born in 1955 will turn 62 in 2017, and for them, the full retirement age is 66 years and two months. That's up by two months from the previous full retirement age, and future retirees can expect equal two-month increases each year until the full retirement age hits 67 for those who turn 62 in 2022 and thereafter.
The rise in retirement age doesn't prevent you from claiming your benefits at 62, but it does impose a small additional financial penalty for doing so. The reduction in benefits for claiming at your earliest opportunity in 2017 rises to 25.83%, up from 25% in 2016. For most retirees, that larger reduction will cost them $20 or less in monthly benefits, but it still shows what amounts to a stealth Social Security cut that many people aren't aware will be happening over the next five or six years.
Learn if you're at risk for having some of your benefits taken back
Reduced benefits aren't the only negative consequence from taking Social Security benefits before full retirement age. In addition, those who claim Social Security early are subject to having to give back some of their benefits if they are still working.
Specifically, Social Security sets maximum earning limits that one can have before forfeiting a portion of your benefits. For 2017, those who won't reach full retirement age will lose $1 in annual benefits for every $2 they earn above the threshold of $16,920. If you do hit full retirement age during the year, then a higher earnings threshold of $44,880 applies, and you lose $1 for every $3 in earnings above that limit.
Even if you forfeit money, there's a silver lining. For every month's worth of benefits you lose because of this rule, you get credited as if you had taken your benefits a month later than you actually did. That will result in larger monthly payments later on, helping to offset the upfront forfeiture. Nevertheless, it's easier to consider your situation in advance and anticipate whether it makes sense to file at all given that you might forfeit a significant amount of your benefits.
The process for claiming Social Security
Once you decide that you want to take your Social Security benefits, you'll need to know the process to follow. Typically, those who intend to take retirement benefits can apply as early as three months before their 62nd birthday. In fact, the Social Security Administration recommends about a three-month lead time in order to give it the time to get your benefits set up correctly and to resolve any unexpected issues before they can affect your monthly checks.
The easiest way to apply for Social Security is through the SSA's website. This online Social Security application will let you complete the process in as little as 15 minutes without ever having to go to a Social Security office or fill anything out for the mail. In most cases, you won't need to provide any additional documentation, and the SSA will process the application. If any further information is necessary, the SSA will let you know, but that's relatively rare. Once you've applied, you can check the status of your application from the SSA's my Social Security account service here.
Filing for Social Security is an important step for retirees, and you want to make sure you make the best decision possible. By keeping these three things in mind, you'll start 2017 on the right foot toward getting the most from Social Security.