Social Security and You: Medicare mess follow-up | Business News

Social Security and You: Medicare mess follow-up

31 Oct 2015 | Author: | No comments yet »

Baby Boomer Social Security Shocker.

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. 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. 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 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. 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. 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. 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.

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. 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. This law eliminated the benefit hold-back once an individual reached full retirement age (FRA).(1) It didn’t take long for some smart folks to realize that proponents of this Act threw it together very quickly, opening the door to additional ways to claim Social Security. 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.

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 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.

File and suspend was the Social Security equivalent of having your cake and eating it too: No longer did you need to decide between either taking earlier but lesser benefits or waiting for the maximum payoff at a later age. Kotlikoff himself has all but built up an empire devoted to teaching people how to use the regs to maximize their Social Security benefits, offering online software and co-writing a bestselling book, Get What’s Yours.

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. 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. By waiting until age 70 (and perhaps continuing to work part-time), the spouse with the higher benefit receives $2,376/month.(2) Keep in mind that the spouse who delays the start of his/her benefit is taking a risk. 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. 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. 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.

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:, along with your name and phone number.

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