There aren't many changes in Social Security for 2016 since there was no change in the Consumer Price Index (CPI-W) from 2014-Q3 to 2015-Q3. Here’s an update for those already collecting benefits, those about to file for benefits in 2016, and the rest who are currently paying into the system.
Those already collecting benefits
- Your Social Security payments will not automatically increase.
- The average monthly payment is expected to be $1,341.
- The average monthly payment for a retired couple (both receiving benefits) is expected to be $2,212.
- For 7 out of 10 people enrolled in Medicare, Part B premiums--which are deducted from your Social Security payments--will remain the same at $104.90 per month per person. The law stipulates that, when there is no cost-of-living increase in Social Security benefits, there is no increase in Medicare Part B premiums. Higher income individuals and couples do pay more, of course.
- An unintended "quirk" of the system is those currently enrolled in Medicare but not yet collecting Social Security benefits will see a 52% increase in Part B premiums to $159.30 per month per person. Since they're not collecting Social Security, their Medicare Part B premiums are not fixed...so they end up paying a disproportionate amount of the Medicare increase (for the 7 out of 10 who have no increased premium).
Those about to file for benefits
- If you begin collecting Social Security before what the government considers “Full Retirement Age" (FRA), in 2016 you can still earn $15,720 ($1,310 per month) without penalty. Otherwise, benefits will be reduced $1 for every $2 in earnings above the limit.
- The earnings threshold is $41,880 ($3,490 per month) if you retire before your Full Retirement Age but do reach it later in 2016. In this case, benefits will be reduced $1 for for every $3 above the limit.
- Once you reach your Full Retirement Age, you can earn any amount without penalty.
- If you work while collecting Social Security early, your reduced benefits are not lost forever. When you reach FRA, your benefits will be recalculated higher to take into account the reduction caused by the earned income threshold.
- The maximum possible Social Security benefit for someone who collects Social Security at Full Retirement Age in 2016 is $2,639 per month.
Those currently paying into the system
- Employees will continue to pay 7.65% of earnings as a combined rate for Social Security and Medicare (Social Security is 6.20%, Medicare is 1.45%).
- Employers will continue to match that 7.65%.
- The maximum taxable earnings on which you pay Social Security taxes is $118,500.
- There is no maximum earned income for the Medicare tax.
- Certain taxpayers with high earned income — $200,000+ single, $250,000+ married filing jointly — will continue to pay an additional Medicare surtax of 0.9% on income over those thresholds.
For more information, visit the Social Security Administration site.