Calculating Social Security Retirement Benefits

31 Oct 2015 | Author: | No comments yet »

Baby Boomer Social Security Shocker.

NEW YORK — Retirees will no longer be permitted to use certain strategies to increase the amount they collect from Social Security by as much as tens of thousands of dollars.The budget deal out of Washington this week is getting applause for phasing out a Social Security loophole known as “file and suspend,” which allowed people to claim more money in benefits via their spouses.ESPN announced it is immediately suspending the publication of its popular Grantland website, and the topic has taken off on social media with many chastising ESPN for the decision.Congress has agreed to, and the president is expected to sign into law, a bill that 1) averts a government shutdown and 2) shuts down two popular Social Security claiming tactics: the-file-and-suspend and the restricted-application Social Security strategies.

Section 831a will eliminate the ability of a higher-earning spouse (normally male) to suspend his benefits to allow his spouse to collect a spousal benefit while allowing her own benefit to grow. The House of Representatives has passed the measure and the Senate is widely expected to follow suit. “File-and-Suspend” and “File-and-Restrict” are both used by couples to boost the amount of Social Security they receive together. And now, millions of Americans who were planning to use these strategies to boost their household’s lifetime benefits must figure out what to do instead.

The agreement includes a section to close what it called “unintended loopholes,” ending two income-bolstering approaches that largely benefited married couples and, in some cases, their dependents. The Halloween-weekend box office could be a bit scary for movie makers, with both “Burnt” and “Our Brand is Crisis” starring Hollywood A-listers expected to take in less than $10 million this weekend.

They were the unintentional results of a hastily-written piece of legislation called “Senior Citizens’ Freedom to Work Act” passed in 2000 when Bill Clinton was president. Here’s what experts had to say: It’s business as usual during the phase-in period, said Elaine Floyd, a certified financial planner and director of retirement and life planning at Horsesmouth, a New York firm that provides financial education to advisers. The strategies being eliminated essentially allowed individuals to collect spousal benefits while their own checks continued to grow. “The main takeaway is that couples who want to coordinate on their claiming strategies have far fewer choices on how to do it,” said Michael Kitces, director of planning research at Pinnacle Advisory Group. “Any dual-income couple is impacted by this,” he added.

It came about as part of legislation designed to encourage people in their 60s to remain part of the paid workforce by eliminating caps on what seniors could earn and still claim Social Security. Stalking real estate on the nation’s Elm Street’s to determine how nightmarish it might be, even as a dream scenario appears to be taking shape for one Chicago house flipper.

If your annual earnings from work exceed a certain amount, Social Security stops paying you some – and potentially all – of your benefits for the year. Not only will this reduce the couple’s retirement income now, it will drastically reduce the surviving spouse’s income (normally the woman) when her spouse passes away. And, individuals who will be over 62 as of Dec. 31, 2015 can still plan on filing a restricted application for spousal benefits when they turn FRA over the next four years. If you do not want to see millions of women impoverished by this attempt to reduce the debt on their backs, contact your representatives and demand that they vote no on the proposed 2016 budget bill.

File and suspend allows one member of a married couple to file for his or her Social Security benefits on reaching the full retirement age but then suspend them. In effect, he is telling Social Security, “Don’t send me a check.” Because he has technically filed, his wife is now entitled to a benefit based upon her husband’s work history. The new restricted application rules apply to those who reach age 62 after 2015, he said, which means people born before 1953 can still pursue this strategy.

As word got out about the file-and-suspend loophole, outrage grew among certain budget-minded and good-government types, as well as many who were concerned about Social Security’s finances. Example: A person born in 1960 or later whose benefit was $1,000 a month at FRA could receive $1,240 a month if they wait until age 70 to claim their Social Security benefit. That extra Social Security boost can help women whose savings were depleted by divorce expenses, whose finances never fully recover from the end of their marriages. A recent survey by AARP found that among those over the age of 50, almost 90 percent said they would rely on Social Security for the majority of their income when they cease working.

For people who have never been married, delaying is still usually advantageous (though not as advantageous as for the high earner in a married couple), because it works out well in the financially scary scenarios in which you live for a very long retirement. And with the change in Social Security laws, the need for such a plan becomes even more important. “People who are 62 to 70 will need to revisit their current plans for claiming and ensure they can be executed under the new rules,” said Elsasser. Since employers and employees split this tax, each would pay half – or 1.3% more; $13 per year more for every $1,000 you earn and we fix this “problem!” But no politician is ever going to bring this up because he or she would have to utter the phrase “raise taxes.” And you simply don’t use those words if you want to be elected. If most couple-claiming strategies go away, the strategy of delaying benefits becomes far less effective when no other benefits can be paid on a record that is suspended, said Blankenship.

But when the non-partisan National Academy of Social Insurance surveyed ordinary Americans and explained the situation in these terms, the overwhelming response was, “Count me in!” (3) 3. October 2014. “Americans report strong support for Social Security and are willing to pay more in taxes to stabilize the system’s finances and improve benefits.” Ms.

It’s an idea that’s been promoted and supported by Democratic presidential candidates Martin O’Malley and Bernie Sanders; Elizabeth Warren has also said she supports increased Social Security payments. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content. If you have a question for Gail Buckner and the Your $ Matters column, send them to: yourmoneymatters@gmail.com, along with your name and phone number.

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