Social Security and Medicare Changes in 2016

2016 brings changes that will affect some people, but for most, it’s business as usual.

Stricter Social Security Suspended Payment Rules

Social Security beneficiaries who choose to delay starting their benefits and accumulate Delayed Retirement Credits can still do so. However, beginning in May 2016, suspending your payments also suspends payments for anyone else receiving payments based on your work. There is a grace period for people who are age 66 or older before April 1 2016 to “File and Suspend”, and still collect spousal benefits during the suspension period. After that, spousal payments will not be paid while the retired worker’s payments are suspended.

No More Claiming Social Security Twice

Some married individuals who are 66 or older have been able to first collect spousal payments and then later switch to payments based on their own work, which will then be higher because they claimed it at an older age. This is called, “Filing a Restricted Application.” Workers who turn 62 in 2016 or later will not be able to file a restricted application and claim both types of payments. Instead they will have to select one or the other. However, those born on January 1, 1954 or earlier may still have the opportunity to file a restricted application.

No COLA Increase in 2016

For just the third time since Cost of Living Adjustments (COLA) began in 1975, Social Security beneficiaries will not receive an increase in their retirement benefits. The other two times there was a zero increase were in the past five years, and last year’s COLA was only 1.7%. This recent trend of low and no COLAs can be attributed to low inflation. However, tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Rising Medicare Costs

Thanks to the zero Social Security benefit COLA, most Social Security recipients will continue to pay the same $104.90 Medicare Part B premium in 2016. This is because Part B premiums are prevented by law from climbing faster than Social Security payments for most existing beneficiaries. However, people who newly enroll in Medicare Part B in 2016 will pay a higher Part B premium of $121.80 per month -a last-minute fix in the 2016 budget bill that prevented a larger increase for new beneficiaries. It seems we can count on Medicare premium increases in future years, as medical costs continue to rise. As in previous years, high income beneficiaries will pay higher Medicare Part B premiums.

Maximum Possible Benefit Declines

The maximum possible Social Security benefit for a 66 year old worker who signs up in 2016 will be $2,639. This is a decrease of $24 per month from last year. Decreases happen when there’s an increase in Social Security’s Wage Index, but no COLA increase for benefits.

Navigating Social Security and Medicare Changes

The Social Security and Medicare programs are complex, with confusing changes to navigate. Helping retirees optimize their benefits is one of our specialties here at Blankinship & Foster. Contact Us to discuss how we can help you with your Social Security and Medicare planning.