Question: Will we be getting a cost-of-living adjustment to our Social Security benefits for 2017?
Answer: Yes, but don't expect much. Social Security benefits will increase 0.3% in 2017, which raises the average monthly benefit for all retired workers by only $5, from $1,355 to $1,360. The maximum Social Security benefit for a worker retiring at full retirement age (age 66 for people born from 1943 to 1954) will be a bit more generous, rising from $2,639 per month to $2,687 per month.
The cost-of-living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of 2014 through the third quarter of 2016. There was no COLA for Social Security benefits in 2016, and the inflation adjustments for the two years before that were small -- 1.7% in 2015 and 1.5% in 2014.
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If you elected to take Social Security benefits before reaching full retirement age and you’re still working, you will be able to earn a bit more in 2017 before your benefits are affected; the earnings limit rises from $15,720 in 2016 to $16,920 in 2017. If you earn more than that, one dollar in benefits will be withheld for every $2 in earnings above the limit. If you reach full retirement age in 2017, you can earn up to $44,880 (up from $41,880 in 2016) before your benefits are affected. One dollar in benefits will be withheld for every $3 in earnings above that amount, until the month you reach full retirement age. See How Social Security Cuts Your Benefits If You're Still Working for more information about the calculations. After you reach full retirement age, you can earn any amount without affecting your Social Security benefits.
It looks like this cost-of-living increase may not be enough to cover the increase in Medicare premiums, especially for people receiving smaller Social Security benefits, and it’s likely the hold-harmless provision will be in effect again for 2017, says Steffen. “Even someone receiving $30,000 per year in Social Security benefits will only see a benefit increase of $90 for the year,” he says. “It’s hard to believe Medicare premiums will go up less than that for 2017.” The Centers for Medicare and Medicaid Services should be announcing the new Medicare premiums soon.
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