The Social Security rule changes that I discussed last quarter (http://bit.ly/1JLNzly) seem to be worrying a lot of people and for good reason. For over 80 years, Social Security has played a significant role in helping Americans ensure their retirement. However, as reliable as Social Security has been it has constantly evolved and 2016 will be an unusually active year for revisions.
If you intend to elect the file-and-suspend or the restricted application strategy, which are being eliminated, you will need to schedule a meeting with your local Social Security Administration office soon. Some reports suggest that there is already a 6 week wait time just to have an initial appointment. The last day to make your election is April 29th, so plan accordingly!
In addition to the elimination of two claiming strategies, there are other changes to Social Security in 2016 regarding the calculation and qualification of benefits.
Several regular annual increases take effect. Various parts of Social Security are subject to annual changes. For 2016, the amount of earnings necessary for a quarter of coverage will increase $40 to $1,260 and the earnings threshold constituting substantial gainful activity for disabled beneficiaries other than the blind will increase $40 to $1,130.
Also, the formula for calculating Social Security benefits will change somewhat. The so-called bend points for benefits will rise, with the lower bend point up $30 to $856 and the upper bend point climbing $177 to $5,157. Increases will also affect the maximum family benefit formula, which puts an upper bound on the total amount of benefits family members can collect on a single person's work history.
What's not changing with Social Security. The monthly benefit for current recipients does not change because inflation remained in check according to the federal government. Therefore, there will be no cost of living increase for 2016.
There are also several thresholds that will stay the same in 2016. The wage base on which the government collects Social Security taxes will remain at the 2015 level, $118,500. In addition, the earned income credit for those who take benefits before full retirement age will stay at $15,720 for those younger than full retirement age all year and $41,880 for those who hit their full retirement age during 2016.
When it comes to Social Security, I think most can agree no one likes change except the one that increase their payout. However, it is important to keep in mind that from a historical perspective Social Security changes occur frequently.
If you are unsure of how these new changes will affect you please do not hesitate to give us a call.