How US Social Security Benefits will be Changing for 2016
Get Ready for the Latest Social Security and Medicare Updates
The presidential candidates have all been talking about their ideas on policy reform for the US Social Security Administration -- it’s a popular topic today. But what some people don’t realize is that there are already a number of changes and improvements that are taking place, many of which will go into effect starting in 2016. Some of these changes will affect current retirees, while others may not effect anyone until they reach retirement age, but it’s good to know for those who are thinking about retiring well.
Here’s a rundown.
In 2016, there is no planned cost of living increase for Social Security benefits
This is the third time since the automatic cost of living adjustments went into effect in 1975 that there has not been enough inflation to warrant an increase in benefits. The last times this happened were in 2010 and 2011, but in 2015 there was a 1.7 percent cost of living increase for recipients.
The earnings limit will remain the same for Social Security benefit recipients
People up to the age of 65 who work and receive benefits can still earn up to $15,720 annually without penalty, and those 66 and older can earn up to $41,880 – which means it can be a good time to start a small business or take on a part time job.
Along with the earnings limit remaining the same, the maximum amount of earned income that earners must pay Social Security Tax is $118,500. Earnings above this are not subject to Social Security payroll taxes, however high earners can expect to still pay in through income taxes and retirement savings plans.
In 2016, the maximum possible benefit is reduced by $24 from last year
This figure is for a 66 year old working person who enrolls in Social Security retirement benefits in 2016. Last year, there was a cost of living index adjustment to $2,663, but in 2016 this is $2,639 because there is no adjustment this year.
The restricted application is being phased out
Right now, if an individual is eligible for both a spousal benefit and a retirement benefit (based on work record), they can only elect the spousal benefit when they reach full retirement age, collecting at a higher rate later on. Now, only those born 1/1/54 or before can use this option. Younger people will get an automatic larger amount.
Social Security Disability benefits recipients will not see a planned reduction in 2016
This is good news as things looked dim when the Social Security Administration announced that the fund was running out by the fourth quarter of 2016. A new payroll law is shifting money from the Old Age and Survivors Trust Fund to the Disability Insurance Trust Fund, to protect people from losing their benefits.
Medicare Part B premium costs are going down
Last year, Medicare beneficiaries were looking at a 50 percent or more hike in Medicare B plan premiums for their medical insurance for this year. This would have affected an approximate 17 million people. The good news is that Medicare Part B premiums are expected to be $104.90 to 119 per month (instead of $159.30) and that there is a small $3 fee that pays down the loan that the government gave to Medicare. The annual deductible will be $166 for Medicare Part B enrollees in 2016.
Experts advise that anyone nearing retirement age take advantage of these cost savings for the year ahead by enrolling as early as possible in the year. It’s possible to continue working while earning a monthly benefit, having access to medical and prescription plan benefits, and building up the retirement savings at the same time.