It has been my custom for most of the last 18 years to write a year-end column that summarizes the Social Security changes and updates scheduled to take place the following year.
Usually, that means I give the planned Cost-of-Living Adjustment (COLA) amounts, along with other revisions that are based on increases to the governmentโs inflation measuring stick called the โconsumer price index.โ But for the third year out of the last 10, the CPI hasnโt budged an inch.
That means there will be no COLA increases for Social Security beneficiaries in 2016. This will trigger lots of letters of complaint to my column along these lines: โWhat do they mean there was no inflation last year? All they have to do is look at my higher rent payments, my increased grocery bills and my escalating drug costs to know that there certainly was an increase in the cost of living.โ
All I can say is that the official mechanism the government uses for measuring inflation didnโt go up. If you want to learn more about this measuring stick, check out the website of the folks who maintain it: the Bureau of Labor Statistics. Youโll find them at www.bls.gov
Social Security COLAs are always a touchy subject for politicians. On the one hand, they sometimes stumble over themselves to hand out Social Security increases in years when the law says no benefit hike is due. This has happened in past years when the CPI showed no inflation. And as I was writing this column, Congress was still kicking around the idea of giving a New Yearโs bonus to Social Security beneficiaries.
On the other hand, every major study Iโve ever seen on the subject concludes that the CPI formula used to calculate Social Security increases is already too generous. So a cut in future COLAs as part of a potential long-range Social Security reform package is likely.
Another measuring stick, called the โnational wage index,โ is used to set increases to other provisions of the law that impact Social Security beneficiaries and taxpayers. The average national wage went up last year, so that leads to a minor increase in the amount of money necessary to earn one โquarter of coverage.โ In 2015, you got one โQC,โ or one Social Security credit, for each $1,220 in earnings you had. That goes up to $1,260 in 2016. Because no one can get more than four Social Security credits in any one year, that means once youโve made $5,040 in 2016, you will have earned your maximum four credits for the year. This really isnโt an issue for most people because they are already โinsuredโ for Social Security benefits.
You generally need only 40 credits to be eligible for Social Security retirement payments โ and that translates into 10 years of work. So if youโve worked for more than 10 years and continue to work, youโre still earning Social Security credits, but they really arenโt doing you much good.
The increase in the average national wage would normally trigger increases in the amount of earnings subject to the payroll tax and in the retirement test limits โ the amount of earnings a Social Security beneficiary under the age of 66 can make before he or she starts losing benefits. But there is a law that says these limits canโt go up in years when there is no Social Security COLA.
So for working Americans, the maximum amount of earnings subject to the payroll tax or self-employment tax remains at $118,500 in 2016.
And for working Social Security beneficiaries, the earnings penalty threshold will remain at $15,720 in 2016. What that means is that if you are under age 66 and getting Social Security, but still working, you will lose one dollar from your benefits for each two dollars you earn over $15,720 next year. And just as in 2015, if you turn 66 next year, you can make up to $41,880 from January up to the month you reach 66. From age 66 on, there is no limit on your earnings.
If you are getting Social Security disability benefits and try to return to work, you get a nine-month โtrial work period,โ during which you generally can earn as much money as you want with no impact on your eligibility for disability payments.
But after those nine months, if you are making what the law calls โsubstantial gainfulโ earnings, you may lose your benefits. That substantial gainful level goes up from $1,090 to $1,130 per month in 2016.
The Social Security Administration manages a federal welfare program called Supplemental Security Income, or SSI. (As I point out every time I mention SSI in this column, this program is NOT paid for out of Social Security taxes. It is funded by general tax revenues.) The federal SSI monthly payment rate wonโt change in 2016. It remains at $733, although states can choose to add to that amount if they want.
I know that many of my readers are interested in Medicare Part B premium increases for 2016. But because I really am not a Medicare expert, Iโm not going to touch that troubled subject with a 10-foot pole. I will say that most older Medicare beneficiaries will continue to pay the current rate of $104 per month, while newer beneficiaries might pay $118.80. And well-to-do people will, as always, pay considerably more. Thatโs as far as Iโm going on the topic.
If you want clarification, you need to talk to a Medicare expert, and thatโs not me! But I can steer you in the right direction. To get free Medicare advice, you need to talk to a Medicare counselor. They are called SHIP (State Health Insurance Program) counselors in most states or HICAP (Health Insurance Counseling and Advocacy Program) counselors in others. To find the SHIP or HICAP person nearest you, go to www.medicare.gov and pull down the menu for your state under โFind someone to talk to.โ Then click on SHIP or HICAP.
