For the nearly 90 percent of Americans over the age of 65 who collect some or all of their retirement benefits through Social Security, 2017 could be a year of changes. For those who are planning to retire within the next five years, current changes to Social Security could have a lasting impact on their benefits too. While the best guide to maximizing your benefits and protecting your wealth is a knowledgeable CPA who can personalize your retirement planning, reading up can help you know which questions to ask when talking to your accountant or financial planner.
Social Security Eligibility Changes for 2017
Many of the requirements for eligibility remain the same this year, but some dates have changed. Currently, you must be 62 years old or above to receive retirement benefits, although you may be eligible for other kinds of Social Security benefits if you are younger. Although 62 is the minimum age for eligibility, many people wait to claim until they reach full retirement age, which is dependent on your birth year. Currently, people born between the years of 1943 and 1954 reach full retirement age at 66. Because the threshold for full retirement is being stepped up to age 67, those born in later years may have months added to their eligibility age according to the following schedule:
Birth Year Full Retirement Age
1955 66 years and 2 months
1956 66 years and 4 months
1957 66 years and 6 months
1958 66 years and 8 months
1959 66 years and 10 months
1960 67 years
Social Security Credits
Eligibility for retirement benefits and payment amounts also depend on the number of Social Security credits you have earned throughout your career. This year, a single credit is equivalent to a net income of $1,300, and you may earn as many as four credits per year. To qualify, in other words, you must have earned at least $5,200 for a minimum of 10 years to be eligible for benefits on your own earned income. These figures refer to 2017 dollars, so income from prior years is converted to present-day values for purposes of calculating eligibility and benefit amounts.
Calculating Social Security Benefits
Working with a financial planner who knows state and local laws is important even when working with federal income, and your New York CPA can go over the specific details of how your benefits are determined. Your lifetime earnings are first indexed for inflation, and then the 35 years during which your earnings were highest are averaged. Dividing the resulting figure by 12 gives you your AIME, or average indexed monthly earnings. This year, the formula for determining benefits grants 90 percent of the first $885 of your AIME, an additional 32 percent of income between $885 and $5,336, and another 15 percent of any amount above this figure. Calculating the effects of early or full retirement will also have an impact on your monthly benefit amount.
Are Social Security Benefits Truly Secure?
Social Security benefits are secured in a trust fund with reserves of nearly $3 trillion, and it is currently taking in more than it pays, leading to an even larger reserve. Although predicting the future is never a precise science, current expectations are that the trust will be depleted in 2034. That does not mean, however, that Social Security payments will end; younger workers will still be paying into the system, and these payments are expected to be enough to cover 75 percent of existing benefits. It is also possible that changes to Social Security income could replenish reserves and maintain current levels of retirement benefits past that point.
Working with a CPA on retirement planning to make the most of 401(k) plans and other programs can also help you meet or exceed your retirement goals.
What Else Is New for 2017?
- A cost-of-living increase of 0.3 percent is planned for 2017.
- The maximum taxable earnings from Social Security benefits, including retirement benefits, are now $127,200.
- The largest current maximum monthly retirement benefit is now $2,687 per month.
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