Social Security in 2016

The end of the file and suspend strategy, effective May 1, is this year’s biggest change to Social Security. Individuals under full retirement age will no longer be able to file and suspend payments with the option to later receive a lump sum for the suspended period. And a spouse will not be able to suspend Social Security benefits to allow their partner to draw on the spouse’s account while it builds delayed credits.

There are a few exceptions. The new rules for voluntary suspension do not affect divorced spouse’s benefits. A married individual who is already receiving payments based on their spouse’s suspended benefits won’t be affected. Seniors who are at least 66 years old before April 29, 2016, can still file a restricted claim of spousal benefits while suspending their own benefit – provided they do so by April 29 (since April 30 is a Saturday). According to articles in Forbes and InvestmentNews, staffs at some Social Security offices have mistakenly claimed workers can only use this strategy if their spouse is also 66. So claimants may need to be persistent to get correct information.

Unless a claimant was 62 by Jan. 2, 2016, they can only receive their own benefit or a spousal benefit, whichever is larger. They won’t be able to change their choice later (i.e., take spousal benefits and then switch to their own).

What stays the same. Because of the lack of inflation in 2015, there will not be a 2016 cost-of-living adjustment (COLA). In the absence of a COLA, 70 percent of Medicare beneficiaries won’t be paying higher premiums. Base premiums will increase from $104.90 to $121.80 per month for the remaining 30 percent. The cap for wages taxed for Social Security remains at $118,500 annually. Earned income limits are still $15,720 annually for individuals under full retirement age who work and claim Social Security benefits at the same time. (Recipients will lose $1 for every $2 earned over the limit.) The income limit for the months before a retiree reaches full retirement age in 2016 is $41,880. Beginning with the month a retiree reaches full retirement age, earnings no longer affect benefits.

The maximum monthly benefit for workers retiring at full retirement age is $2,639 (slightly down because of an increase in the national average wage index in the absence of a COLA). The estimated average for all retired workers in 2016 is $1,341. If you have concerns about maximizing your Social Security benefits as part of your comprehensive retirement plan, please contact our office. Please call Jordan Dechtman, Denver wealth manager at 303-741-9772, email him at Jordan@JordanDechtman.com or visit our website www.JordanDechtman.com to schedule an appointment.