Are you aware of the recent changes to Social Security and Medicare? With the new recently passed budget bill that the President signed will mark some significant changes to the way future generations retire. This is being billed as a for better or for worse scenario. While Congressional leaders rarely agree on anything anymore when it comes to politics and what direction the country should go. But they did pass a bipartisan piece of legislation that agrees to fund the government for the next two years and raise the nation’s debt ceiling resulting in a much clearer path for the politicians until after the Presidential elections. So let’s look at what this new piece of legislation does change with Social Security and Medicare.
One Social Security benefit that I have written about in the past that will change is when a married couple has the main wage earner file for their benefits then suspend them while the other spouse collects their benefits. This technique allowed the main wage earner to suspend their payment and get an additional 8% a year in benefits until they reached age 70 and that particular additional benefit stops. This technique allowed a couple to collect a Social Security check while deferring the second until a later date. By doing this, the couple was assured a higher benefit at age 70 or as a survivor benefit. This technique will end on May 1, 2016, and no new elections will be allowed. Those who have already elected to do this technique will be grandfathered until they reach age 70.
The restricted application will also be phased out as well. In this technique, a person can elect for a spousal benefit while they let theirs continue to be dormant. By doing this, the person who is collecting the spousal benefit allows theirs to continue to appreciate at 8% a year until they reach age 70. This method allowed the person to collect the larger of the two benefits at a later stage of their retirement. Under the new system, those born January 1, 1954, and earlier will still be allowed to utilize this method. Those born after that date will automatically get the larger of the two benefits.
Social Security disability’s trust fund was on pace to run out of funding in the fourth quarter of 2016. This was going to result in an automatic reduction of benefits of 19%. The new law fixes this issue by shifting payroll tax revenues from the Social Security trust fund –the Old-Age and Survivors Insurance Trust Fund to the Disability Insurance Trust Fund.
With regards to Medicare Part B, some 30% of beneficiaries were expecting an increase of about 52% in their insurance premiums and deductibles in 2016. Under the new law, an estimated 17 million Americans will pay about $119 a month and not the estimated $159 a month in premiums for Medicare Part B. About 70% of Americans will continue to pay the same premium as 2015 in 2016 or $105 a month. Beneficiaries will, however, be required to pay an additional $3 per month to help offset the loan the government gave Medicare to offset lost revenue.
If you have any questions or require any additional information on the new effects the budget bill will have on Social Security or Medicare, please contact me directly.
