You’ve probably already heard that Social Security recipients will not get a raise in their benefits in 2016. One person’s bad news is often the next guy’s good news. Social Security raises are tied to inflation, and of course high inflation is bad for the economy as a whole. But high inflation means a stiff raise in Social Security benefits. This year, inflation was ultra-low, and that means no raise for Social Security. For 2015, benefits rose only slightly, by 1.7 percent.
For 2016, the average monthly benefit for Social Security recipients will be $1,341, and for retired couples who both receive benefits, the average check will be $2,212. The maximum benefit a person can draw in 2016 is $2,639. This is actually down from the 2015 level of $2,663 by $24. Why did this change? These figures are calculated using a different measure.
Other news that isn’t new:
The wage base for paying into Social Security.
If you’re still working and make a six-figure income, you will not see an increase in how much you pay into Social Security tax. Workers pay 7.65 percent on the first $118,500 (known as the wage base) plus 1.45 percent on earnings over that amount. In most years, that wage base rises, taking a slightly bigger bite from high earners. But for 2016 there will be no hike in the wage base.
Working while drawing benefits. If you draw benefits and also work but you haven’t yet reached your full retirement age, the amount you can earn before losing some of your benefits doesn’t change in 2016. Just as in 2015, you can earn up to $15,720 without affecting your Social Security. Before this amount, you forfeit $1 for every $2 you earn. So for example, if you earn an additional $1,000 (for a total of $16,720) you will forfeit $500 in benefits.
If you reach your full retirement age in 2016 (which is currently 66), the earnings limit rises to $41,880 for the months before your 66th birthday. And, for any amount you earn above that limit, you will forfeit $1 for every $3 you earn. So let’s say you turn 66 in June of 2016. For January through May, you earn $1,200 over the limit of $41,880. You would forfeit $1 for every $3 of the excess of $1,200 (a total of $400).
In the month you reach your full retirement age, you may earn any amount without losing any benefits. Using the same example, if you turn 66 in June of 2016, any amounts you earn from June 1 on will not cause the loss of a single dollar of Social Security.
Medicare premiums. By law, Medicare Part B premiums cannot increase faster than Social Security benefits for most recipients, therefore, these premiums will not generally change. However, premiums will be higher for people who first sign up for Medicare Part B in 2016, and for certain high income Medicare beneficiaries.
Benefits for children. There’s a little known Social Security benefit that children may qualify to receive. If you’re eligible for Social Security and still raising young children, the kids may be able to draw benefits based on your record. According to the Social Security Administration, the child must be the biological or adopted child of an insured worker, or in some cases, a dependent stepchild or grandchild of an insured worker. The benefits paid for children are in addition to payments to the workers themselves. To qualify, the children must be under age 18 and unmarried (or if they are still in high school but over 18 they can collect until they turn 19 or graduate, whichever comes first). If the kids are disabled, other rules apply, so contact Social Security for the details.
When you file for Social Security retirement benefits, each qualifying child can get a benefit equal to half of what you receive at your full retirement age. This is true even if you apply for benefits earlier, at a reduced amount. You should know though, that there’s a limit to how much money a family can collect, based on a complex “family maximum payment” formula. Let’s say you have two qualifying children collecting benefits on your record. If the maximum is exceeded, the payments to those children, but not to you, will be cut back. See ssa.gov/oact/cola/familymax.html.
Here’s an example of how that is determined. Suppose your full retirement age benefit is $2,200. Your family maximum benefit is $3,700. Your benefit remains the same, which leaves $1,500. If you have two qualifying children, the most they can each receive is half of the remaining $1,500 or $750 each.
To learn more, see the SSA publication (No. 05-10085) “Benefits For Children” at ssa.gov/pubs/EN-05-10085.pdf. You can contact the SSA to ask specific questions at 1-800-325-0778, Monday through Friday from 7 a.m. to 7 p.m.)
Collecting Social Security from a distant shore
Internationalliving.com says the number of Social Security recipients who have retired overseas is steadily rising. In 2013 – the last date for which data is available — the U.S. government paid out more than $3 billion to retirees overseas, an increase of $160 million over 2012, says the U. S. Social Security Administration.
Why are they going? The reasons may be many, but overall, in the countries that are seeing that have the biggest pull offer a cost of living that is low enough, while maintaining quality of life, that retirees can live much better on their Social Security benefits than they can here.
The top retirement location seems to be Europe, followed by Canada and then Mexico. Specifically, increases are significant in countries such as the Philippines, Thailand, Panama and Ecuador, all listed by Internationalliving.com as retirement havens.
Americans can receive Social Security in almost every country, and the process is fairly simple. The actual number of SS beneficiaries living abroad in 2013 had risen to 373,224. But in reality the number is likely much higher. Social Security recipients can receive benefits in one of two ways:
1. They can establish a bank account in their new country of residence, or
2. They can continue to have checks deposited into the banks they used before moving abroad, and using ATMs to withdraw their funds.
For those who take option number 2, the Social Security Administration may not have a record of where they actually live, which would understate the number of overseas retirees.
Something to think about? You can learn more about retiring in an affordable foreign paradise by logging onto this site: http://internationalliving.com/2015/09/infographic-your-social-security-payments-overseas/
