New Changes to Social Security and Medicare
The federal budget bill, signed into law recently by the President, includes some changes to Social Security and Medicare that will affect many Americans approaching their retirement years. Here is a brief list of fixes:
- Some Medicare recipients (about 17 million Americans) were set for a large increase in Part B premiums. The budget bill decreases the adjustment to $121.80/month or more. The other participants in Medicare keep their same monthly premium of $104.90 during 2016. All participants will pay an extra $3 monthly to pay back the federal government for a loan to Medicare. All Part B recipients will pay the $166 annual deductible for 2016, up from $147 this year.
- A popular strategy, File and Suspend, involves a married person, usually the higher wage earner. At full retirement age, they file for retirement benefits and then suspend receipt of payments. The spouse then applies for spousal benefits. While the couple receives spousal benefits, the suspended benefits grow 8% annually (which can be turned on as late as age 70). This strategy is ending for those who apply for retirement benefits after May 1, 2016.
- Another strategy, Restricted Application, is similar to the previous one. Currently, two working spouses with Social Security eligibility can elect to receive only a spousal benefit each at full retirement age, which allows their own benefits to grow and then collect later. This strategy is now only available for those born before 1/1/1954. Anyone younger will receive the larger eligible benefit when applying for benefits with no deferral.
- The Social Security Disability trust, set to run out of funding by 2016, was not part of the original concept of social security started in 1935. It was added to Social Security benefits by congress in 1950. Those Americans currently receiving disability benefits were scheduled to receive an automatic 19% decrease of benefits by the end of next year. The new budget bill re-directs dollars from the retirement trust fund to the disability trust fund.