However , we find little empirical evidence that actual claiming behavior is related to the actuarial advantage of delay . Indeed , most individuals appear to claim shortly after reaching age 62 or stopping work . Labor supply appears to be the primary determinant of the claiming decision . We do find a consistent relationship between education levels and delayed claiming , possibly because education may be associated with financial literacy or a longer life expectancy .”
While there is a clear monetary advantage to delaying Social Security benefits , few people actually chose to delay , so the cost to the system may not have been as high as projected .
BBA CHANGES CLAIMING RULES Regardless of analysis suggesting the cost of claiming strategies could be much lower than believed , the BBA ’ s new rules eliminate two claiming strategies – “ Claim and Suspend ” and “ Claim Now , Claim More Later ” – rather abruptly .
• CLAIM AND SUSPEND ( a . k . a . file and suspend strategy ). The strategy allows individuals to claim and then voluntarily suspend their Social Security benefits . Since they suspend the benefits , they can accrue delayed retirement credits . When a working person claims and suspends benefits , his or her spouse can claim spousal benefits , allowing a couple to receive benefits today , and receive benefits enhanced by delayed retirement credits in the future if the working spouse claims benefits after full retirement age . 9
The new rules established by the BBA will make Claim and Suspend strategies unavailable beginning May 1 , 2016 . As a result Americans who are at ( or past ) full retirement can take advantage of the opportunity , but they must claim and suspend before April 30 , 2016 . 10
• CLAIM NOW , CLAIM MORE LATER ( a . k . a . restricted application strategy ). This strategy allows married individuals to claim spousal benefits from Social
Security while not claiming their personal benefits . Delaying personal benefits means they are able to earn delayed retirement credits . When they reach full retirement age , they can choose between receiving their personal benefits or receiving their spousal benefits . 9
The new rules eliminate this strategy at the end of the year . Americans who reach age 62 in 2016 may be able to employ it , but younger Americans will not have the opportunity . 11
If you are currently employing these strategies , you may be grandfathered . More information will be available when the Social Security Administration offers its interpretation of the new rules , and that should happen before the end of this year . 12
If either of these strategies is a part of your current retirement plan , and you are not at an age where you can execute the strategy , you may want to work with a financial professional to redesign your plan .
Sources : 1 http :// www . usnews . com / news / politics / articles / 2015 / 11 / 02 / obama-signs-2-year-budget-debt-dealbefore-default-deadline 2 https :// www . ssa . gov / legislation / legis _ bulletin _ 040700 . html 3 https :// www . socialsecurity . gov / planners / retire / agereduction . html 4 http :// www . kiplinger . com / article / retirement / T051-C000-S004-social-security-earnings-testensnares-a-spouse . html # bt8g2GoR6WeUlhE8.99 5 http :// www . pbs . org / newshour / making-sense / 12-secrets-maximizing-social-security-benefits-newrules / 6 http :// www . forbes . com / sites / janetnovack / 2015 / 11 / 12 / after-budget-deals-surprise-cuts-can-boomersreally-count-on-social-security / 7 http :// www . cnbc . com / 2015 / 11 / 04 / what-the-budget-deal-means-for-retirees . html 8 http :// www . nber . org / papers / w17866 . pdf 9 http :// crr . bc . edu / wp-content / uploads / 2009 / 08 / wp _ 2009-17 . pdf 10 http :// www . investmentnews . com / article / 20151202 / BLOG05 / 151209982 / dont-delay-on-file-andsuspend-social-security-claims 11 http :// www . cnbc . com / 2015 / 11 / 05 / file-and-suspend-social-security-strategy-ending . html 12 http :// www . bankrate . com / financing / retirement / social-security-changes-devil-is-in-the-details /
This material was prepared by Peak Advisor Alliance . Peak Advisor Alliance is not affiliated with Summit Financial Group , Inc .
Premier Planning Group is an independent firm with securities offered through Summit Brokerage Services , Inc ., Member FINRA , SIPC . Advisory services offered through Summit Financial Group , Inc ., a Registered Investment Advisor .
115 West Street , Suite 400 , Annapolis , MD 2140 1 • 443-837-2520
This material was prepared by Peak Advisor Alliance . Peak Advisor Alliance is not affiliated with Summit Financial Group , Inc .
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Premier Planning Group is an independent firm with securities offered through Summit Brokerage Services , Inc ., Member FINRA , SIPC . Advisory services offered through Summit Financial Group , Inc ., a Registered Investment Advisor . 115 West Street , Suite 400 , Annapolis , MD 21401 • 443-837-2520
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