Yes, you read that right! There will be a 0.3% cost of living adjustment (COLA) for those receiving Social Security and Supplemental Security Income (SSI) benefits in 2017. That means most Americans will receive an increase of $4 to $5 per month.
The COLA goes into effect in January 2017 for Social Security benefit recipients and on December 30, 2016 for those who receive SSI benefits. More than 60 million Americans receive Social Security benefits and another 8+ million receive SSI benefits.
For some recipients, this increase may be offset by an increase in Medicare premiums. The premiums for Medicare in 2017 have not been released yet, but we do know that Medicare costs have been going up dramatically. The June Medicare Trustees Report projected that a 22% increase in Medicare B premiums is needed to balance the Medicare Part B trust fund in 2017.
About 70% of Social Security beneficiaries will not see an increase in Medicare premiums because of the “hold harmless” provision. This basically says that Medicare premium increases cannot exceed a rise in Social Security benefits. With the low COLA of .03% for 2017, the hold harmless provision will apply.
But by law, all other Medicare recipients must absorb the majority of the Medicare Part B cost increase for 2017. Those who may see an increase in their Medicare premiums include high-income individuals, new Medicare enrollees, and people who are on Medicare but are not yet taking Social Security.
If you fall into this category, be sure to review the verification letter you receive in November that notifies you of surcharges for 2017. Social Security uses tax returns from 2015 to determine 2017 high-income surcharges. If your income has been reduced since 2015 due to a life-changing event, such as retirement or reduction in work hours, you may be eligible to apply for a lower bracket premium. Congress may also provide some relief as it did in 2015.
Another annual adjustment (effective in January each year) is the amount of earnings on which Social Security taxes are paid. Based on the increase in average wages, the maximum amount of earnings subject to the Social Security tax will increase in 2017 to $127,200 from $118,500. It is estimated that about 12 million of the 173 million workers who pay Social Security taxes in 2017 will pay more because of the increase.