9 Ways Retirement Is Changing in 2016
Some could help your finances, others could pinch
(This article originally appeared on GoBankingRates.com.)
As you plan for retirement, it's important to stay on top of changes that can affect your retirement accounts, Social Security and investment vehicles. The following nine ways retirement is changing in 2016 could impact your saving strategy and might require you make adjustments to your retirement plan to stay on track:
1. The New MyRA Is Now Available
The myRA is a Roth Individual Retirement Account (IRA) that has no fees, and the government guarantees that it will never lose its value. It’s easy to set up contributions — you can use funds from your checking or savings account, tax refunds or your income.
This retirement savings account has a variable interest rate, which is currently roughly 2.1 percent. When the account reaches $15,000 or turns 30-years-old, the money is transferred to a private sector Roth IRA.
If you've been waiting for an easy-to-use retirement account, the myRA might be right for you in 2016.
2. The Saver's Credit Threshold Has Increased
This tax credit helps improve the ability for low- and middle-income retirement savers to contribute more to their retirement accounts.
The limit for Adjusted Gross Income (AGI) qualifying for the saver’s credit in 2016 increased by $250, to $30,750 for single filers (for married couples filing jointly, the AGI limit rose $500, to $61,500).
3. No More Social Security Restricted Applications
Under a new budget law, the restricted-application option for claiming Social Security is being eliminated. Before this new law, one spouse could file a restricted application after reaching Full Retirement Age to receive only spousal Social Security benefits while his or her own retirement benefit earned delayed credits until age 70. But now, only those who will be 62 or older by the end of 2015 will be able to still use this strategy.
4. Most Couples Won’t Be Able to 'File and Suspend'
Here's another Social Security change that will likely affect many retired couples in 2016. In the past, spouses could take advantage of the "file and suspend" strategy to increase their Social Security benefits. Spouse A would file for Social Security benefits but delay them, allowing Spouse B (or an eligible family member) to file for and collect spousal benefits while Spouse A's retirement benefits continued to grow. But by May 2016, this will change.
As CNBC reports, in order for your spouse to receive a benefit based on your earnings record, you generally now need to actually be receiving benefits as well. However, if the primary earner turned 62 by Jan. 1, 2016 and the other spouse who collects the benefits is at least 66, they might be able to continue to use the current file-and-suspend strategy until May, reports NBC News.
5. Health Care Costs Are Set to Rise
Although the government has focused on making health care more affordable for everyone, costs are expected to rise this year. CBS News reports: "Independent experts are forecasting bigger premium increases in 2016 than last year, averaging from the high single digits to the teens."
But some experts believe that most people will be able to find affordable health plans in the year ahead. "For most consumers, premium increases for 2016 are in in the single digits, and they will be able to find plans for less than $100 a month," the CEO of the health-insurance marketplaces told The Wall Street Journal.
Still, the extra money you might need to pay for health care will likely have to come out of your retirement budget, which means you'll have to start allocating more money to go toward your retirement savings.
6. There Is No Social Security Cost of Living Increase
Social Security recipients won’t get an increase in their monthly benefits in 2016 because there’ll be no cost-of-living increase. As other retirement costs — such as health care — go up, retirees will want to start preparing themselves financially for the year ahead. This can include contributing more to a retirement savings account, dabbling in the stock market, cutting back on spending and more.
7. Medicare Part B Premiums Are Rising for Some
While 70 percent of Medicare beneficiaries will continue paying the same Medicare Part B premium amount they did in 2015 ($104.90 a month), 30 percent will pay 16 percent more ($121.80 a month). These include high-income beneficiaries.
8. 401(k) Automatic Enrollment Makes it Easier to Participate
Recent data released by Bank of America Merrill Lynch found that more 401(k) plans are offering automatic increases and automatic enrollment, making it easier for workers to participate in these plans. "During the first half of 2015, the number of 401(k) plans combining auto enrollment and auto increase saw a 40 percent increase," according to a press release. In 2016, we’re likely to see similar increases, so saving money for retirement will become even easier for many.
9. The Maximum Possible Social Security Benefit Decreases
For a person at Full Retirement Age who enrolls for Social Security benefits in 2016, the maximum possible monthly benefit will be $24 less than in 2015 — $2,639 instead of $2,663. While this is a small amount, every dollar counts when it comes to retirement savings.
It's best to consult a retirement and tax specialist about the impact of these retirement changes on you in 2016 so you can make any necessary adjustments to your retirement plan.