This Sunday begins what we’ve all been waiting for – 2017. In the New Year, the Social Security Administration (SSA) announced that Social Security benefits will be revised for a cost-of-living adjustment (COLA) increase of 0.3%. At the beginning of 2016, there was only a 0% increase. But, don’t get too excited too quickly, as the typical adult receiving benefits will see only a $4.00 increase in his/her monthly check.
At the same time, the SSA bumped the maximum amount of earnings subject to the Social Security tax to $127,200, up from the current $118,500, an increase of 7.34%. Only about 12 million individuals will be affected by that increase since most American wage earners make less than the $127,200 maximum, and thus the increase will be borne by the 12 million higher-income taxpayers.
The COLA is supposed to ensure that people receiving Social Security benefits continue to have the same purchasing power from one year to the next without regard to inflation. Older adults in particular need this inflation protection since their savings and other income tends to fall as they age, including their pensions, and their dependence on Social Security increases. The meager increase is due in part to the fact that the SSA uses a different consumer price index (CPI), which is much lower than the CPI used to adjust tax rates. It’s clear that the SSA’s CPI is not delivering adequate inflation protection to older adults.
This is overshadowed by the fact that the Medicare Trustees in their June report cautioned that there could be a substantial increase in the Medicare Part B Premium for those currently paying $121.80 a month. These folks, whose premiums went up by over 16% for 2016, could see another increase that would bring their monthly premium to as much as $149, an increase of over 20% for 2017.
If you are helping an elderly relative with their money situation, there also may be an opportunity for some tax benefits. Please call Dagley & Co. for some assistance as soon as possible.
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