2017 will be an important year for Social Security. Many routine changes to the program took place at the beginning of the year, but the bigger question is whether the new president will work with lawmakers to craft a long-awaited comprehensive reform of Social Security. Below, we'll look at the Social Security changes that have already taken effect, and then turn to speculation about the direction of any potential reform efforts.
Basic annual changes to Social Security
Every year, some aspects of Social Security change, and 2017 is no exception. The annual changes to Social Security include the following:
- The annual cost-of-living increase boosted monthly benefits by 0.3% beginning in January.
- The wage base on which workers must pay Social Security payroll taxes jumped by $8,700 to $127,200 in 2017.
- Earnings limits for those collecting Social Security prior to full retirement age climbed this year. Those who won't reach full retirement age in 2017 can earn up to $16,920 annually before forfeiting a portion of their Social Security benefits, which is $1,200 more than 2016's limit. Those who do hit full retirement age this year have a limit of $44,880, which is $3,000 higher than last year's limit.
- It now takes $1,300 of income to get a Social Security credit for eligibility purposes, up $40 from last year.
- The maximum Social Security retirement benefit for 2017, based on retiring at full retirement age with maximum earnings over a 35-year career, rose $48 to $2,687 per month.
These changes will have an impact on tens of millions of retirees, and in some cases, the effects will be significant. But while none of these changes is unexpected, there's a lot more uncertainty about what could come out of Washington to affect Social Security this year.
Are major changes to Social Security coming in 2017?
Already, lawmakers are lining up to consider massive changes to Social Security. Many believe that the program's financial difficulties require tough action, and at least one proposal would lead to significant reductions in benefits going forward. The Social Security Reform Act of 2016 includes several provisions that would effectively cut benefits, including raising the full retirement age to 69 and means-testing spousal and children's benefits for high-income earners. The bill includes certain offsetting provisions, such as raising minimum benefits and adjusting benefit calculations to favor low-income workers over high-income workers. Moreover, the elimination of the earnings test would allow those who claim early benefits to keep all of them regardless of how much they work.
Meanwhile, other lawmakers still believe that expanded Social Security benefits are the solution to a variety of problems affecting seniors. Most expansion proposals come from the Democratic Party, and with Republicans controlling both Congress and the White House, few see those proposals moving forward. However, there's a chance that certain elements of expanded benefits could become part of a broader reform effort.
For his part, newly inaugurated President Donald Trump told the American public during the election campaign that he would leave Social Security unchanged. He believes that the economic proposals he will ask Congress to enact will result in a surge of growth that will boost the incoming payroll tax revenue enough to resolve Social Security's long-term financial difficulties.
However, some economists are skeptical that U.S. gross domestic product could grow quickly enough to close Social Security's funding gaps. That could motivate the new president to consider alternatives to a hands-off policy on Social Security, including some of the privatization proposals that Trump wrote about prior to starting his political career.
Keep your eyes open in 2017
2017 is already shaping up to be a momentous year, and Social Security could find itself at the epicenter of reform efforts in Washington. Although retirees will be pleased with even small increases to their benefit checks from cost-of-living adjustments, major changes to Social Security laws could have a far greater impact on what they get both now and in the years to come.
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