2015 was a momentous year for Social Security, and not all of the news for the millions of Americans who rely on the program was good. In particular, the removal of some key strategies will adversely affect retirement planning for many current and future Social Security recipients. Let's take a look at three of the worst headlines about Social Security in 2015.
2 Social Security strategies bite the dust
Social Security benefits took a major cut in November, when lawmakers agreed to a federal budget deal that eliminated the file-and-suspend and file-as-a-spouse-first strategies. File and suspend allowed married couples to have one spouse who had reached full retirement age file for benefits but immediately suspend them, making the other spouse eligible to collect spousal benefits while letting the first spouse's benefits earn delayed retirement credits. Filing as a spouse first allowed someone who had reached full retirement age to claim spousal benefits while letting their own retirement benefits earn delayed retirement credits. Now, those who file and suspend will also cut off any benefits going to a spouse, and those who try to claim spousal benefits will also be deemed to have filed for their own retirement benefits at the same time.
Grandfathering provisions will allow some future use of these strategies. Those who wish to file and suspend must do so before May 2016, and anyone who turns 62 by the beginning of 2016 will be allowed to use the file-as-a-spouse-first strategy. Nevertheless, the move takes away a valuable provision that thousands could have used to boost their total benefits, and for many who had expected to use the strategy in the near future, the immediacy of the legislation comes as a nasty surprise.
No cost-of-living increase for Social Security in 2016
The biggest piece of bad news for Social Security recipients came during the fall, when the Social Security Administration announced that there would be no upward cost-of-living adjustment for benefits in 2016. Benefit increases have been meager in recent years, with three consecutive increases of between 1.5% and 2%, but seniors have come to rely on even small boosts to help them make ends meet in retirement.
The drop in gasoline prices was the biggest reason for the lack of a Social Security COLA, as energy makes up a considerable portion of the Consumer Price Index on which annual benefit adjustments are based. Unfortunately, many seniors don't actually spend as much on gasoline as those who are still working, and some advocacy groups have argued that the SSA needs to have COLAs reflect the expenses that Social Security recipients have to pay. Despite legislative efforts to put a COLA back on the table, it appears that Social Security recipients need to prepare for a year of no increases in their monthly checks.
Reforms fail to reach consensus
Finally, the looming deadline of 2016 to get more funding into the Social Security Disability Trust Fund failed to produce a longer-term solution to Social Security's financial problems. In the end, lawmakers simply diverted money from the retirement portion of the trust fund, preserving disability benefits but ignoring the underlying issues that plague the entire Social Security system.
Indeed, opinions on Social Security seem more divided than ever. In the past, most policymakers believed that reining in Social Security would be the eventual necessary solution to the funding crisis. Yet more recently, some are calling for increases to Social Security benefits, in moves that could cost the government more money and necessitate moves like raising the Social Security wage base to fund them. Meanwhile, others remain adamant that ways to slow the rate of increase of benefits are necessary in order to keep the program solvent over the long run.
With a presidential election year coming in 2016, few expect much progress on Social Security reform. That's bad news for current and future recipients who now have to expect surprise moves similar to what lawmakers did with file and suspend and other key Social Security strategies in 2015.
Social Security remains a cornerstone for financial security among older Americans, but these news items show that you can't take your benefits for granted. Only by taking action to defend your benefits actively can you help ensure that they'll be there when you need them.