President Obama signed into law a bipartisan budget bill last week that, among other things, changes — for better and worse — Social Security and Medicare laws. Here's a wrap-up:
• File and suspend. Currently, a married person — typically the higher wage earner in a couple — who's at least full retirement age could file for his or her own Social Security benefits and then immediately suspend those benefits while the spouse could file for spousal benefits. By doing this, the higher wage earner's benefits would grow 8% per year. In the meantime, the couple still get a Social Security check, and down the road the surviving spouse could get a higher benefit.
That option is ending for new filers starting May 1, 2016, so if you're interested, now's the time to apply. People already using this strategy will be grandfathered in until age 70.
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• Restricted application. This is also being phased out. Currently, individuals eligible for both a spousal benefit based their spouse's work record and a retirement benefit based on his or her own work record could choose to elect only a spousal benefit at full retirement age, according to Social Security Timing. That would let them collect a higher benefit later on.
Under the new law, however, only those born Jan. 1, 1954, or earlier can use this option. Anyone younger will just automatically get the larger of the two benefits, according to Social Security Timing.
• Social Security Disability. The Social Security Disability trust was on pace to run out money next year and, as a result, millions of Americans were going to receive an automatic 19% reduction in their disability benefits in the fourth quarter of 2016. The new law fixes that by shifting payroll tax revenue from one Social Security trust fund — the Old-Age and Survivors Insurance Trust fund — to another, the Disability Insurance Trust fund.
Medicare Part B. Some 30% of Medicare beneficiaries were expecting a 52% increase in their Medicare Part B medical insurance premiums and deductible in 2016. Under the new law, those beneficiaries — an estimated 17 million Americans — will pay about $119 per month, instead of $159.30, for Part B. (Some 70% of Medicare beneficiaries will continue to pay the same premium in 2016 as they did in 2015, $104.90.)
Beneficiaries, however, will also have to pay an extra $3 per month to help pay down a loan the government gave to Medicare to offset lost revenue. Plus, all Part B beneficiaries will see their annual deductible increase by 15% to about $166 in 2016.
—Robert Powell is editor of Retirement Weekly, contributes regularly to MarketWatch, The Wall Street Journal, USA TODAY, and teaches at Boston University.