Will Recent Changes in Social Security Affect Me?

Written by Joel Bengds

You may have heard on the news or read recent articles stating that changes to Medicare premiums and Social Security benefits are coming in 2016.  If you are a Medicare recipient you are aware that the Open Enrollment Period is October 15 to December 7.  I want to give a brief overview of some of the changes and the impact.  If you have any questions or are wondering if these changes will affect you please call us.

Medicare premiums will be increasing but will only impact about 30% of participants.  If you fall into one of the following groups you will be paying the higher Medicare premium:

• People who sign up for Medicare for the first time in 2016
• People who are enrolled in Medicare but are not receiving Social Security
• People who are eligible for both Medicare and Medicaid
• People with higher income ($85,000 for individual tax return and $170,000 for joint tax return)

There is good news if you fall into the following group. The Bipartisan Budget Act reduced the Medicare Part B premium increase from $159.30 per month to $124.80 ($121.80 + $3 surcharge).  If you are already enrolled in Medicare Part B and receiving Social Security in 2015 your premium will remain $104.90 per month in 2016.

If you don’t have a Medicare premium increase in 2016 you fall into the held harmless provision because you are already receiving Social Security and Medicare.  The good news is your Medicare premium won’t increase; the other side of the coin is you will not be receiving a cost of living increase for your Social Security benefits in 2016.  So let’s move into the changes with Social Security.

Like Medicare not all participants will be affected but future beneficiaries will see the biggest impact. The changes to the claiming strategies for Social Security are as follows:

File & Suspend

The popular File-And-Suspend strategy will no longer be available for those who have reached full retirement age (FRA).  This provision allowed a FRA eligible participant to file for benefits but suspend their benefit.  When the FRA spouse did this it would allow the spouse to start receiving spousal benefits.  This benefit will not be available to individuals who attain FRA after April 29^th, 2016.

Another provision that is gone is the Individual File-And-Suspend.  This was an opportunity for an individual to file-and-suspend at FRA and earn delayed retirement credits.  This strategy allowed the individual to later change their mind and claim benefits retroactively to the date of the original suspension.

Restricted Application

Also gone is the Restricted Application Strategy for dual income Married couples.  Basically this strategy allowed one spouse to file a Restricted Application and receive a spousal benefit.  If you turn age 62 in 2015 you are grandfathered under the current rules.

Claim Now, Claim More Later

In the case of Divorce, the “Claim Now, Claim More Later” strategy is also disappearing for those younger than 62 years old in 2015.  This strategy was to file a restricted application to obtain the ex-spouse spousal benefits while delaying individual benefits.

With these changes and probable future changes to Social Security the decision on when to start receiving benefits is very important.  Many unknown factors like longevity, inflation and medical expenses must be accounted for in the analysis. If you live a long life, the decision to delay taking Social Security can account for hundreds of thousands of dollars in extra benefits during your life.  This is a very important decision and we look forward to guiding you along life’s path.