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Investing Blog Roundup: More on Social Security Changes

Over the last week, there have obviously been numerous articles written about the Social Security changes. For those of you who haven’t gotten enough, here are two more brief discussions of the changes.

Investing Articles

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New Social Security Rules: What You Need to Know

The budget bill passed by Congress this week (text here) includes a number of very significant changes to Social Security. (If you’re interested in reading the law itself, Section 831 contains the relevant wording.)

There are two primary categories of changes:

  • One set of changes to the deemed filing rules (which affect the “restricted application” strategy), and
  • Another set of changes to the rules regarding voluntary suspension of benefits (which affect the “file and suspend” strategy).

Quick note for those wondering: Yes, I will be working to get an up-to-date version of my Social Security book released as quickly as I can.

Changes to Deemed Filing Rules

To explain the changes, it’s easiest to first briefly explain how things work right now, before the new law goes into effect.

Currently, if you are younger than full retirement age, and you file for either a retirement benefit or a spousal benefit, the SSA checks to see whether you are eligible for the other type of benefit also (i.e., retirement or spousal). If you are, you are automatically “deemed” to have filed for that other benefit as well. You have no choice in the matter.

This deemed filing rule is the reason that, when people want to file a restricted application (i.e, an application to collect just spousal benefits while they allow their retirement benefit to continue growing), they must wait until full retirement age in order to do so.

For anybody who will be 62 or older as of 1/1/2016, there will be no changes to this deemed filing rule or to the restricted application strategy.

For anybody who will not yet be age 62 as of 1/1/2016, however, there are two big changes.

First, the deemed filing rule will be applicable regardless of age. That is, even if you have reached full retirement age, if you file for retirement benefits or spousal benefits and you are also eligible for the other type of benefit (spousal or retirement) at that time, you will be deemed to have filed for both types of benefits. This singlehandedly eliminates the restricted application strategy for those who are affected.

Second, deemed filing will now kick in immediately for anybody when they become eligible for either spousal or retirement benefits if they’re already collecting the other type of benefit. (Previously, deemed filing only kicked in when you were actually filing for something.)

That second change is likely a bit confusing, so let’s run through an example.

Example: You file for retirement benefits at age 62, but you are not yet eligible for a spousal benefit because your spouse hasn’t yet filed for his/her own retirement benefit. Then, two years later, your spouse files for his/her retirement benefit. Under the old rules (that still apply to anybody who is 62 or older by 1/1/2016), there would be no deemed filing, because the law only checked for deemed filing on dates when you’re actually filing for something. Under the new rule, in our example when you become eligible for spousal benefits at age 64, you’ll automatically be deemed to have filed for them immediately.

Changes to Suspension of Benefits

There are also some changes regarding voluntary suspension of benefits. Specifically, for suspension of benefit requests that are submitted more than 180 days after enactment of the bill (i.e., as of 4/30/2016 or later, if I’m counting correctly), there will be three changes:

  1. While your benefits are suspended, you cannot receive a benefit based on anybody else’s work record,
  2. While your benefits are suspended, nobody else can receive a benefit based on your work record, and
  3. There will no longer be the ability to retroactively unsuspend. (See here for a discussion of that strategy.)

The second and third changes essentially eliminate the “file and suspend” strategy as it exists now.

To be clear, the new rules do not eliminate the ability to suspend. Rather, they change what happens while your benefits are suspended. You can still choose to suspend benefits as a sort of change-your-mind option. For example, if you file at age 62 and decide at age 67 that you wish you had waited, you still have the option to suspend benefits until age 70 and collect delayed retirement credits (which would increase your monthly benefit amount).

Quick administrative note: There will be no article this upcoming Monday, as I’ll be working on updating Social Security Made Simple, with the goal of having an up-to-date version available as quickly as is reasonably possible.

Want to Learn More about Social Security? Pick Up a Copy of My Book:

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less
Topics Covered in the Book:
  • How retirement benefits, spousal benefits, and widow(er) benefits are calculated,
  • How to decide the best age to claim your benefit,
  • How Social Security benefits are taxed and how that affects tax planning,
  • Click here to see the full list.

A Testimonial from a Reader on Amazon:

"An excellent review of various facts and decision-making components associated with the Social Security benefits. The book provides a lot of very useful information within small space."

2016 Tax Brackets, Standard Deduction, Personal Exemption, and Other Updates

Every year, I publish a brief update regarding significant tax changes for the following year. For 2016, there’s no big news. But we’re going to do this anyway, because I know many people (myself included!) find it helpful to have a quick reference throughout the year. If you want even more details, the official IRS announcement can be found here.

The tax brackets for 2016 are as follows:

Single 2016 Tax Brackets

Taxable Income
Tax Bracket:
$0-$9,275 10%
$9,276-$37,650 15%
$37,651-$91,150 25%
$91,151-$190,150 28%
$190,151-$413,350 33%
$413,351-$415,050 35%
$415,051+ 39.6%


Married Filing Jointly 2016 Tax Brackets

Taxable Income
Tax Bracket:
$0-$18,550 10%
$18,551-$75,300 15%
$75,301-$151,900 25%
$151,901-$231,450 28%
$231,451-$413,350 33%
$413,351-$466,950 35%
$466,951+ 39.6%


Head of Household 2016 Tax Brackets

Taxable Income
Tax Bracket:
$0-$13,250 10%
$13,251-$50,400 15%
$50,401-$130,150 25%
$130,151-$210,800 28%
$210,801-$413,350 33%
$413,351-$441,000 35%
$441,001+ 39.6%


Married Filing Separately 2016 Tax Brackets

Taxable Income
Marginal Tax Rate:
$0-$9,275 10%
$9,276-$37,650 15%
$37,651-$75,950 25%
$75,951-$115,725 28%
$115,726-$206,675 33%
$206,676-$233,475 35%
$233,476+ 39.6%


Standard Deduction Amounts

The 2016 standard deduction amounts will be as follows:

  • Single or married filing separately: $6,300
  • Married filing jointly: $12,600
  • Head of household: $9,300

The additional standard deduction for people who have reached age 65 (or who are blind) is $1,250 for married taxpayers or $1,550 for unmarried taxpayers.

Personal Exemption Amount and Phaseout

The personal exemption amount for 2016 is $4,050.

However, the total personal exemptions to which you’re entitled will be phased out (i.e., reduced and eventually eliminated) as your adjusted gross income (i.e., the last line of the first page of your Form 1040) moves through a certain range.

  • For single taxpayers, personal exemptions begin to be phased out at $259,400 and are fully phased out by $381,900.
  • For married taxpayers filing jointly, personal exemptions begin to be phased out at $311,300 and are fully phased out by $433,800.
  • For taxpayers filing as head of household, personal exemptions begin to be phased out at $285,350 and are fully phased out by $407,850.
  • For married taxpayers filing separately, personal exemptions begin to be phased out at $155,650 and are fully phased out by $216,900.

Limitation on Itemized Deductions

As was the case for the last few years, the amount of itemized deductions which you are allowed to claim is reduced by 3% of the amount by which your adjusted gross income exceeds certain threshold amounts. These threshold amounts are the same as the lower threshold amounts listed above for the personal exemption phaseout (e.g., $259,400 for single taxpayers). However:

  1. Your itemized deductions cannot be reduced by more than 80% as a result of this limitation, and
  2. Your itemized deductions for medical expenses, investment interest expense, casualty/theft losses, and gambling losses are not reduced as a result of this limitation.

IRA and 401(k) Contribution Limits

For 2016, the contribution limit to Roth and traditional IRAs is unchanged at $5,500, with an additional catch-up contribution of $1,000 for people age 50 or older.

The contribution limit for 401(k), 403(b), and most 457 plans is unchanged at $18,000, with an additional catch-up contribution of $6,000 for people age 50 or older.

The maximum possible contribution for defined contribution plans (e.g., for a self-employed person with a sufficiently high income contributing to a SEP IRA) is unchanged at $53,000.

AMT Exemption Amount

After adjusting for inflation, the following are the AMT exemptions for 2016:

  • $53,900 for single taxpayers,
  • $83,800 for married taxpayers filing jointly, and
  • $41,900 for married taxpayers filing separately.

“Shared Responsibility Payment” (Penalty for No Health Insurance)

As with 2015, one of the biggest changes for individual income tax is that the calculation of the penalty for having no health insurance is increasing (according to schedule). has the details of the calculation here.

For More Information, See My Related Book:


Taxes Made Simple: Income Taxes Explained in 100 Pages or Less

Topics Covered in the Book:
  • The difference between deductions, exemptions, and credits,
  • Itemized deductions vs. the standard deduction,
  • Several money-saving deductions and credits and how to make sure you qualify for them,
  • Click here to see the full list.

A testimonial from a reader on Amazon:

"Very easy to read and is a perfect introduction for learning how to do your own taxes. Mike Piper does an excellent job of demystifying complex tax sections and he presents them in an enjoyable and easy to understand way. Highly recommended!"

Investing Blog Roundup: Don’t Listen to Dave Ramsey’s Investment Advice

Dave Ramsey has had a truly remarkably degree of success with helping people get out (or stay out) of debt. Unfortunately, much of his investment advice is pretty bad. And he apparently has no plans to change that advice.

Investing Articles

Other Money-Related Articles

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How Can There Be “More Sellers than Buyers”?

Quick housekeeping note: There will be no article this upcoming Friday (10/16) or Monday (10/19), as I will be attending the annual Bogleheads conference this week, and I want to be able to devote my full attention to it. We’ll be back to our regular schedule as of Friday 10/23.

A reader writes in, asking:

“Sometimes I hear on the news that there were ‘more sellers than buyers today’ and that caused a stock, or the stock market, to go down. How can this be possible? Isn’t it the case that there has to be a buyer for every seller, otherwise there would be no transaction?”

Yes, you’re absolutely right. When people talk about there being more buyers than sellers (or vice versa) over a given period, they’re using sloppy wording, for two reasons.

First, it’s not the number of buyers and sellers that matters, but rather with the number of shares that people want to buy/sell. (After all, one huge buyer can drive up the price of a stock, even if they’re the only one buying while many different people are selling.)

Second, there does indeed have to be a buyer and a seller for each transaction to occur.

When people say that there were more sellers than buyers, what they really mean is that, at the opening price (i.e., the price of the stock at the beginning of the day) the number of shares that people wanted to sell exceeded the number of shares that people wanted to buy. (In economics jargon, quantity supplied exceeded quantity demanded.)

Or, to illustrate using the type of chart you’d see in an economics course, the price of the stock would be at Price A in the following picture — where quantity supplied exceeds quantity demanded.


So, in order to get rid of the shares they want to get rid of, some sellers lowered their price. And that lower price attracted buyers who would not have bought at the previous, higher price.

And, eventually, a new (lower) equilibrium price is reached (Price B in the chart), where the quantity supplied is the same as the quantity demanded — or where, in the common but sloppy phrasing, there is a buyer for every seller.

Of course, in our modern high-speed stock market, this process does not take an entire day. It can happen in a matter of minutes or even seconds. And, in the complex real world, it’s not a smooth one-directional process that results in a stable equilibrium stock price. Rather, it’s a never-ending back-and-forth sort of thing.

But the general microeconomic principles that determine the prices of other goods and services are the same principles that determine the prices of stocks. That is:

  • When the number of shares that people want to buy at the current price exceeds the number of shares that people want to sell at the current price, the price will go up.
  • And when the number of shares that people want to sell at the current price exceeds the number of shares that people want to buy at the current price, the price will go down.

Investing Blog Roundup: Disciplined Investing

There are countless reasonable ways to invest — countless possible portfolios that would be acceptable for a given person.

More challenging than picking a reasonable investment strategy and portfolio is the task of sticking with them. This week, Rick Ferri gives six fundamental rules for helping you stick with your plan.

Investing Articles

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