Many of you may have heard about the budget compromise recently reached between the outgoing House Speaker, John Boehner, and the administration. The bill, referred to as the The Bipartisan Budget Act of 2015, does a lot of things from extending the debt ceiling to funding for the Defense Department …..
…. AND it also contains some provisions that will have a major impact on those preparing for retirement and those already retired.
A lot has been discussed since last summer about the major increases that face Medicare beneficiaries next year. I blogged earlier on this subject elsewhere on this site.
The provision addressing these projected increases will help to lower the Medicare Part B premium increase schedule to take effect on 1/1/2016.
Briefly, since Social Security will not have a cost of living adjustment for 2016, Medicare’s increased costs will have to be spread over just 30% of Medicare beneficiaries, leading to a huge cost increase in Part B premiums. Keeping these cost increases minimal required Congressional action — and this is addressed in the budget bill. The bill apparently attempts to keep premiums consistent with current levels, pushing off the increases into the future for “repayment,” presumably loading the current costs onto future rates.
The other provision that few are paying any attention to may have a BIG impact on the financial planning for many people getting ready for and already in retirement. The bill aims to take away two “file and suspend” strategies that help to provide Social Security married couples and underpin many financial plans.
This Bloomberg article explains the situation::
There are two matters in the article to which I must draw your attention:: (1) AARP supports this bill, even though the elimination of the Social Security claiming strategies will hurt future retirees; and (2) the Bloomberg author characterizes the “file and suspend” strategy as “double dipping,” and that the provisions in the law that allows the strategy were not intended.
The real issue with this strategy, in my opinion, is that the law requires the higher earning spouse to begin their claim to Social Security benefits so that the lower earning spouse can begin spousal benefits (50% of the higher earner’s benefit). The original intent was to permit people to continue to work and avoid taking a Social Security benefit too early, and stop making Social Security contributions. Already nearly 3/4 of Social Security claimants are taking benefits before their Full Retirement Age.
What can you do now? The bill is at the Senate, so contact your Senators with your comments and ideas.-->