October 30, 2015


Budget Deal Ends Key Social Security Claim Strategies (ANNE TERGESEN, Oct. 28, 2015, WSJ)

The budget bill the White House and congressional leaders hammered out Monday would shut down two popular Social Security claiming strategies that married couples and their financial advisers have come to rely on to squeeze the maximum from their retirement benefits.

The bill, which passed the House Wednesday and now moves to the Senate, would end two strategies that combined can add "tens of thousands of dollars" to a couple's lifetime retirement income, in part by allowing one spouse to claim as many as four additional years of a spousal benefit, said Michael Kitces, director of planning research at Pinnacle Advisory Group Inc. in Columbia, Md.

The strategies under fire--known as file-and-suspend and a restricted application for spousal benefits--attracted interest in the wake of a 2000 law that allowed Social Security beneficiaries to voluntarily suspend their checks after they had applied for benefits. While it wasn't the law's intent, the option to file and suspend made it possible for a worker's spouse to start collecting a benefit based on the worker's earnings record while the worker took advantage of delayed retirement credits. Those credits increase a worker's benefit by 6% to 8% for each year he or she delays claiming between the ages of 66 and 70. [...]

The strategies are valuable for couples who have the financial wherewithal to time the start of their benefits for the maximum expected payoff over their lifetimes. By contrast, many individuals find they need to start collecting at the earliest possible age, usually 62, to pay their bills. According to a 2009 report by Boston College's Center for Retirement Research, if everyone who could benefit from the strategies used both, 45% of the additional benefits earned would be paid out to wealthiest 40% of Social Security beneficiaries.

It's worth just establishing the precedent of targetting the wealthy in entilement reform.
Posted by at October 30, 2015 11:46 AM

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