Social Security is the bedrock of retirement planning for millions of Americans, and the program still closely resembles what it has looked like for decades. 2015 was an unusually active year for Social Security, and some of the things that happened to it could have dramatic implications both in the coming year and in the long run. Let's look at some of the key things that happened to Social Security in 2015.
A modest cost-of-living increase to begin the year
Social Security recipients began the year with a modest increase in their monthly benefits, with the annual cost of living adjustment amounting to 1.7%. The boost reflected tame inflation throughout much of 2014.
As small as that amount is, it at least gave Social Security recipients something extra in their checks. That won't be the case in 2016, as falling gas prices and other deflationary trends led to no COLA for the coming year.
Debate between larger and smaller benefits
For years, policymakers have looked at ways to reduce Social Security benefits to make the program more financially sustainable in the long run. Yet in 2015, many of those who favor expanding Social Security spoke out, and several lawmakers led a charge toward not just protecting benefits at current levels but also offering more generous payouts. Those efforts led to a number of proposed bills that would raise benefits in a number of different ways.
These efforts didn't overwhelm the established group of lawmakers who continue to look for ways to hold back the growth in Social Security spending that current demographic trends predict. Nevertheless, it marked a turning point for sentiment over Social Security, and some now see the program as a key element in fighting poverty among the elderly and making up for the loss of many employer-sponsored pension plans and other retirement-income sources.
Another year closer to trust-fund exhaustion
The financial condition of Social Security remained a dire concern among many in 2015, and the annual 2015 Social Security Trustees Report didn't do much to improve the mood. The trustees expect the Social Security Trust Fund to last until 2035, a year later than it expected in 2014, but the disability trust fund remained on target to run out of money next year. The trustees gave details on a couple of possible course of action, saying that if payroll taxes rose by slightly more than 2.6 percentage points, it would be sufficient to keep the program solvent through 2090. Alternatively, a benefit cut of 16% would leave the fund in shape over the next 75 years.
Lawmakers did take action on the imminent failure of the disability fund, diverting money from payroll taxes to prevent what would have been a roughly 20% drop in benefits. This should put off further problems until 2022, but it merely puts off the day of reckoning until both the retirement and disability funds are in greater financial danger.
Elimination of Social Security strategies for spouses
Finally, lawmakers took away a couple of key Social Security strategies that many married couples used successfully to boost their overall benefits. The file-and-suspend strategy will no longer be available as of May 2016, as you will no longer be able to file for benefits and immediately suspend them while still letting your spouse claim Social Security spousal benefits on your work record. In addition, filing only for spousal benefits won't be an option for those turning 62 in 2016 or later, with the so-called restricted application or filing-as-a-spouse-first strategy becoming unavailable for younger Social Security recipients.
Many proponents of the legislative move argue that these strategies were loopholes that wealthier Social Security recipients used disproportionately, and the savings will help the program be more financially sustainable for its intended purpose. Nevertheless, for those who've planned for years on the assumption that those strategies would be available, 2015's events serve as a stark reminder that there's no guarantee that you'll get any Social Security benefit even after a lifetime of paying payroll taxes into the system.
Social Security went through many changes in 2015, and they'll have consequences for your benefits both now and in the future. In addition, some of the things we saw happen in 2015 could lead to further changes down the road that you'll want to prepare for now.