There aren’t many Social Security changes for 2016. However, there are a few exceptions.
Read on for the details of these changes – including what’s not changing – plus be sure to grab my free 2016 Social Security Quick Reference PDF. It will provide you with what you need to know in a jiffy.
What’s Not Changing
The most noteworthy rules that have not changed are as follows . . . .
The Social Security Administration announced in October that there would be no automatic benefit increase in 2016. This is because the measure they use to gauge the prices we pay for stuff (CPI-W) did not increase.
Make sure to read my related guest post on FinanceandFlipFlops.com: The 2016 Social Security Cost of Living Adjustment Perspective and a Glimmer of Hope in 2017.
The combined tax rate for Social Security and Medicare will not change from the current amount of 7.65% (for employees) and 15.30% (for self-employed individuals). It should be noted that these rates do not include the additional .9% Medicare tax for those individuals over certain income thresholds.
Maximum Taxable Earnings
The amount of earnings subject to Social Security tax is also unchanged at $118,500. Although this number is based on the changes in the National Average Wage Index, which increased in 2014, the law prohibits increasing the amount of earnings that can be taxed if there is no cost-of-living adjustment.
Earnings Test Amount
The amount of income that you can earn before your full retirement age and draw Social Security stayed the same as well. Again, this amount normally changes with a corresponding change in the National Average Wage Index, but it cannot increase if there is no cost-of-living adjustment.
Take a look at my article Social Security Earnings Limit & Working In Retirement for related information.
Here’s what actually changed in 2016 . . . .
Available Social Security Benefit at Full Retirement Age
In an odd twist, the maximum Social Security benefit available at full retirement age actually declined. This is due to the fact that there was an increase to the National Average Wage Index, but no cost-of-living adjustment. This calculation is fairly complex and is covered in detail by Jim Blankenship in his article on maximum Social Security benefits.
If you’re interested in how Social Security benefit calculations work, make sure to read Behind The Curtain: How They Calculate Social Security Benefits.
Earnings Required for a Social Security Credit
The amount of earnings you need to qualify for one Social Security credit also changed. It’s not a big change, but worth noting for those who work part-time or for those who are self-employed with high expenses.
Want to learn more about Social Security credits? Read Social Security Credits: How Many Will You Need?
Estimated Average Monthly Social Security Benefits Payable
Finally, there are a few averages that are mostly unchanged from 2015 but are still worth mentioning as some have changed. See the table below.
My Most Valuable Tool
After a few years of providing Social Security consulting services, you may think I wouldn’t need to use much reference material. Wrong! I rarely let my Social Security Quick Reference PDF get out of arm’s reach. This is a valuable tool! It’s two pages and packed with all the information that I use the most frequently.
If you want it, download it here. Yes, it’s free with no strings attached!
Thank you for reading. If you have any questions regarding your Social Security benefits and would like a strategy tailored to your specific situation, contact me today.