New Social Security Rules to End Key Filing Strategies | Business News

New Social Security Rules to End Key Filing Strategies

31 Oct 2015 | Author: | No comments yet »

Burns: We need a health care revolution now.

Congress is putting an end to two Social Security filing strategies that many couples have used to add tens of thousands of dollars to their retirement incomes. 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.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. The claiming strategies were eliminated as part of the federal budget bill, which was passed this week by both the House and Senate and is expected to be signed by President Obama.

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. 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 strategies under fire—known as file-and-suspend and a restricted application for spousal benefits—have made it possible for both members of a couple who are 66 or older to delay claiming benefits based on their own earnings records while one pockets a so-called spousal benefit based on the other’s earnings. 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. That way, both individuals can take advantage of delayed retirement credits, which increase their earned benefits by 6% to 8% for each year in which they defer claiming between the ages of 66 and 70—and one gets some income from Social Security in the meantime. Combined, the strategies can boost lifetime retirement income by as much as $60,000 or more, says William Meyer, chief executive of, a service that identifies Social Security claiming strategies likely to yield the highest amount over a beneficiary’s life span. 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.

This allowed the lower-earning partner—usually the wife—to take her spousal benefits when she turned 66, while the other member of the marital team—usually the husband—continued to work. In the future, individuals who are eligible for a spousal benefit will be deemed to have filed for their own retirement benefit as well, explained Kitces, who wrote about the change on his blog. 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. Closing the so-called loopholes, along with measures to change the disability investigation process and combat fraud, are projected to save about 0.04 percent of the total taxable earnings for the Social Security trust funds over the next 75 years. If you won’t turn 66 until after the six-month window closes, your relatives won’t receive a dime unless you are already receiving your benefits, says Web Phillips, senior legislative representative at the National Committee to Preserve Social Security and Medicare, a nonprofit advocacy group. 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.

Even as Republicans running for president talk about the need for entitlement reform—by which they mean cutting Social Security benefits—making the elderly take a pay cut is not a popular position among the voting public. Younger divorced people will receive either their own earned benefit or a spousal benefit—whichever is higher—instead of having a choice to take one and switch to the other later. 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.

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