They really put one over on us. With all the horrible news events lately, the pressure in Washington to produce an approved budget, and the joy that the government won’t be shut down once again, lawmakers slipped in major changes to Social Security without soliciting any comment or feedback (so far as the planning industry can determine).
It’s probably not going to surprise you that these changes are not to your benefit. Many of the Social Security claiming strategies that could be used to maximize your benefit have been eliminated. If you were born after 1954, you will not be able to use the “file and suspend” strategy, where the usually higher earning spouse, upon reaching full retirement age, was able to file for benefits, then suspend them. The spouse could then claim spousal benefits, while letting benefits on your own work record continue to grow until you claim them at the higher level reached by 70. Now, if you apply you will get whatever is the higher benefit to which you’re entitled, but you won’t have the option to restrict that application to “spousal only”, so you won’t get the bump up at 70. Also, if one person files and suspends, benefits for both spouses are suspended. It is unclear yet how this will affect divorced spouses, since it’s possible that a vindictive ex-spouse could refuse to collect benefits to postpone the ability to claim spousal benefits. Hopefully, this will be clarified by regulations or rectified by an amendment.
If you will be 62 by 2016, you can still take advantage of restricting your claim to spousal benefits, then switching at 70. Widows and widowers benefits are not affected, and anyone who is currently claiming should be grandfathered in.
This is being justified by saying it closes “loopholes”, as if people were doing something wrong by trying to get a decent level of retirement. I have to ask again, why do we not have a national commitment to guaranteeing a decent retirement to all citizens, as does EVERY OTHER Western Democracy? Instead of trying to prevent people from getting the pittance that is Social Security, and trying to cut the pensions of government workers who have them, we should be moving toward a solvent system that provides a decent retirement for all workers.
Confusing? Yup. If you do have questions, I’d be happy to analyze your situation and discuss alternatives and possibilities with you.