5 Social Security Changes to Watch for in 2017

The maxim that nothing ever stays the same applies to the Social Security system. Each year, the government makes Social Security changes, such as revising guidelines about how to file for and receive benefits.

In the coming year, you’ll see more Social Security tweaks. It pays to stay abreast of them when doing your financial planning. However, 2017 might also hold bigger changes than usual, as President-elect Donald Trump and congressional Republicans weigh on Social Security. Here are Social Security changes to prepare for in 2017.

1. Monthly Benefits, Earnings Threshold and Taxes Will Rise

On the campaign trail, candidate Trump vowed to save Social Security. But the president-elect has yet to detail his plans for America’s retirement system. The only certain changes for Social Security are those already on the books.

The good news for 2017 is that Social Security benefits will increase under the cost-of-living adjustment (COLA). The bad news is that the COLA for 2017 is only 0.3 percent, which is not likely to impact a retiree’s standard of living. If you receive monthly benefits of $1,000, expect an additional $3.

The earnings-test threshold also changes in 2017. This refers to how much your benefits are cut if you work past retirement age. In 2016, the threshold was $15,720. For every $2 you earned above that limit, you lost $1 in benefits. For 2017, the threshold rises to $16,920, potentially saving you up to $600.

Americans earning more than $118,500 will pay additional taxes for Social Security in 2017. In 2016, wage earners paid Social Security tax on the first $118,500 earned. In 2017, the wage base increases to $127,200. If you earn at least $127,200, your taxes go up by $539.

2. Republicans Might Reform Social Security

The Social Security program is underfunded. The Social Security Board of Trustees reports that the current fund will be depleted by 2034. That makes political action on the issue virtually certain. But what can Americans expect from the new administration?

Few details emerged during the presidential campaign, although Trump did tell the country, “Our goal is to keep the promises made to Americans through our Social Security program.” For retirees, it is not clear what path Trump intends to take to fulfill that commitment. It’s also unclear whether the Republican-controlled Congress will be on the same page with the new president.

Brannon T. Lambert, retirement expert at Canvasback Wealth Management in Raleigh, N.C., suggests that changes to Social Security will likely include proposals Republicans have made over the past decade to solve the funding problem. These include:

  • Increasing the retirement age
  • Limiting benefits to wealthier Americans via means testing
  • Changing the way benefits are calculated

While there is no guarantee that these will be part of Trump’s Social Security plan, it makes sense to keep an eye on any coming proposals and to build up other retirement resources.

See: 9 Reasons You Won’t Be Able to Retire When You Want

3. Retirement Age Might Increase

Of all potential Social Security changes, raising the full retirement age has been one of the most frequently discussed. All Republican candidates for president except Trump supported the idea. Although raising the age wasn’t mentioned in speeches by Trump, it might be part of his Social Security plan.

The early retirement age — currently 62 — sets the point at which you can start collecting Social Security benefits. But you get a larger monthly benefit if you wait until you reach full retirement age before collecting Social Security.

Under current law, full retirement age is 66, but this is already scheduled to rise to 67. According to Forbes, raising the full retirement age by one year lowers benefits about 7 percent across the board.

What kind of increase might be suggested for full retirement age? Republican Rep. Sam Johnson of Texas suggests upping full retirement age to 69 as part of a packet of Social Security changes he proposes. Other commentators, such as author and Yale Law School professor Anne L. Alstott, have suggested raising it to 76. It remains to see whether an increase in full retirement age is part of Trump’s Social Security plan.

4. Means Testing Might Be Implemented

In recent years, Republican leaders also have supported imposing a means test on Social Security benefits. This idea has not been a focus of discussions by Trump on Social Security, and might not be part of his Social Security plan.

Proponents argue that Social Security benefits should be reserved for people without adequate means. They claim that shifting benefits away from wealthy Americans would leave a greater benefit for lower-income retirees. Opponents point out that Social Security is an insurance program. All who experience the insured event — either retirement or disability — should have the right to receive benefits.

Implementing a means test would have the downside of increasing the administrative cost of Social Security.  As presently set up, the Social Security program spends less than 1 percent on administration costs, said Diane Archer, founder of JustCareUSA.

Related: 15 Ways Retirement Will Change Next Year

5. Overall Benefits Might Get Cut

Trump consistently has said he would not cut Social Security benefits, but lawmakers have already floated the idea, said Dave Littell, professor of taxation at The American College of Financial Services in Bryn Mawr, Pa. Littell references the bill introduced by Texas congressman Johnson that solves the Social Security funding problem entirely by making reductions in benefits. Although not officially a part of Trump’s Social Security plan, it has a Republican following.

In addition to raising the retirement age, Johnson’s program also would make the following changes:

  • Modestly increase benefits for low-income workers with lifetime average salaries of up to $22,105 in inflation-indexed pay
  • Cut benefits for everyone else from 17 percent to as much as 43 percent
  • Eliminate cost-of-living increases for retirees earning an adjusted gross income of more than $85,000, or $170,000 for couples. It also would reduce benefits for others by using the chained consumer price index to calculate other cost-of-living benefits.

Johnson’s bill does not add any new revenue to the program, but instead relies on benefit cuts. So, make sure you’re saving enough.

Littell, however, does not believe Social Security changes in 2017 will include benefit cuts. “This is a hard issue to tackle, as Americans like Social Security,” he noted. “The last attempt to change Social Security benefits was the privatization plan of George Bush, who couldn’t get it passed with a Republican Congress like we have now.”

6. Debt Limits Might Impact Social Security

Benefits could also be slashed under a new proposal by Republican Rep. Tom Price of Georgia, whom Trump named for secretary of Health and Human Services. Price’s plan proposes long-term debt limits. Failure to meet these limits would trigger automatic, across-the-board cuts to federal benefit programs, including Social Security.

Under the bill, members of Congress would not have to negotiate a way to achieve their fiscal goals. They would simply have to vote in favor of reducing the national debt. When the debt bumps against those levels, automatic cuts in Social Security and similar programs would be triggered.

Find Out: How Much Money Do I Need to Retire?

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