CHANGED SOCIAL SECURITY CLAIMING RULES
gb FINANCE
THE BIPARTISAN BUDGET ACT
CHANGED SOCIAL SECURITY CLAIMING RULES
The wealth management professionals at Premier Planning Group can help clients estimate the most financially advantageous strategy in order to maximize Social Security benefits . Using advanced software , our experts can input a client ' s Social Security data to find the best withdrawal date down to the month and week . This tool is effective for clients who are near retirement age and are considering whether to collect Social Security or to engage personal or spousal benefits , as well as for younger clients who are planning a career-long wealth management strategy for themselves and their families .
Last November , the Bipartisan Budget Act of 2015 ( BBA ) was signed into law averting a United States default and deferring further discussion of U . S . debt and spending levels until after 2016 ’ s presidential and congressional elections . While the new law simplifies some issues for our nation ’ s leaders , it may complicate others because the BBA includes provisions that affect Social Security retirement benefits . 1
SOCIAL SECURITY RULES ARE CHANGING – AGAIN When the Senior Citizens Freedom to Work Act of 2000 ( SCFWA ) was signed into law , it eliminated the Social Security earnings test for Americans who reach full retirement age and want to continue to work . 2 ( Full retirement age for people born after 1943 is about 66 . For those born after 1960 , full retirement age is 67 . 3 ) The earnings test , which remains in place for Social Security beneficiaries who are younger than full retirement age , causes $ 1 of benefits to be withheld for every $ 2 in earnings above the annual earnings limit . 4
While the SCFWA was a welcome change for many Americans of retirement age , it changed the way taxpayers approached Social Security benefits . Prior to the SCFWA , many people thought , as the Social Security Administration suggested , they would receive approximately the
same amount of benefits whether they retired early , at full retirement age , or later . Early retirees received lower benefit payments than people who retired at full retirement age or later , and late retirees received higher payments than people who retired at full retirement age or earlier . 3
While that may have been true at one time , rapidly increasing longevity caused some experts to reach a different conclusion . Laurence Kotlikoff , a professor of Economics at Boston University , wrote : 5
“ For a high-earning , 60-year-old couple … if they wait until 70 to collect their retirement benefits , they will still be up $ 350,000 compared to taking their retirement benefits at 62 . That ’ s the power of being able to wait to collect a 76 percent greater check every month from age 70 through 100 if you live that long .”
One of the unexpected consequences of the SCFWA was it created loopholes in the Social Security system . By employing specific claiming strategies , taxpayers could increase the amount of lifetime benefits they received from Social Security . 6
Receiving higher benefits helped Social Security recipients ; however , paying higher benefits had the potential to put additional stress on an already taxed Social Security system . CNBC reported a paper published by The Center for Retirement Research at Boston College estimated these strategies could cost roughly $ 10 billion each year . 7
That claim has been disputed by other experts in the field who argue few new retirees are able to delay taking benefits long enough to truly maximize their income from Social Security . The Decision to Delay Social
Security Benefits , a 2012 paper written by John Shoven , Director of the Stanford Institute for
Economic Policy Research , and economist
8 , pgs 2 and 33
Sita Nataraj Slavov , reported :
“ We have shown that delaying Social Security is actuarially advantageous for a large subset of the population …
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GREENBOOK | SUMMER 2016