Social Security remains a hot topic for my clients and one of confusion and concern. Unfortunately, there’s almost as much misinformation out there regarding Social Security as there is accurate information. Some of that is due to a couple key components to Social Security that were changed in 2015, due to the Bipartisan Budget Act. The law changed several Social Security claiming strategies which the bill referred to as “unintended loopholes” that married couples used to boost their benefits.
So as part of our commitment to discussing the many variables to consider in your retirement plan, here are two major ways in which the Social Security election rules have changed:
- There’s no more double claiming. The Social Security administration will pay the largest benefit to which you are entitled, whether on your own record or your spouses, reduced for claiming early if you choose to do so before your full retirement age (FRA). You can no longer choose which benefit to collect if you claim before your FRA. Another way of saying this is that if you file for Social Security, you are deemed to have filed for both your own benefit and any spouse to which you have been married to for more than 10 years.
- The file and suspend rules have gotten more strict. The key change is that you cannot get paid on spousal benefits unless your spouse has also elected, up until FRA. At that point you could “file and suspend “which would trigger benefits for a spouse while your own benefit continues to earn delayed retirement credits worth 8% per year for every year you postpone collecting beyond your FRA up to age 70. But if you suspend, you suspend all payments, spousal included.
It’s also worth noting that if you elect before FRA, you could still get a spousal earnings adjustment once your spouse elects their benefit later in life. That means you can elect your own benefit before a spousal benefit kicks in, and in doing so, you are not eliminating the ability to collect spousal later. The difference here is that if you collect at age 62, you then concede to a spousal benefit closer to 35% of your spouses benefit instead of the 50% benefit available at FRA.
Confused?! You’re not alone.
What hasn’t changed is the need for planning. Planning pays off and so does waiting on benefits if you plan to live a long and healthy life. You shouldn’t decide to claim early, at FRA, or even after FRA in the absence of doing a breakeven analysis and having a financial plan. And given the changes in Social Security laws the need for such a plan becomes even more vital. So revisit your current plans for claiming and ensure they can be executed under the new rules.
Give us a call. We are here to align your personal values, vision and wealth.
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Securities offered through LPL Financial, Member FINRA and SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor. U.S. Financial Advisors and Haas Financial Group are separate entities from LPL Financial.