Your Social Security benefit may now be affected by your age.
For those born in 1953 or earlier:
If you have reached age 62 before January 1st 2016 and have not yet applied for your social security benefit, please pay attention:
- “You are still permitted to file a restricted application, which allows one spouse to defer his or her own benefit from full retirement age (66) to age 70, while collecting 50% of the spouse’s full retire- ment benefit. Those born in 1953 or earlier must still wait until to age 66 to apply for this restricted application while filing and suspending his or her own to age 70.
- Beginning May 1st, if one spouse files and suspends his or her own benefit, typically from age 66 to age 70, the other spouse is not permitted to begin collecting his or her benefit, if based on the
suspending spouse’s earnings, until the file and suspend spouse begins his or her benefit. This is most common when one spouse earned at least 50% more annual income over a lifetime than the other spouse.
- “If you are age 66 and have filed and suspended your benefits and your spouse plans to begin his or her benefit based on your earnings at age 66, you have until April 30th to unsuspend the sus-pended spouse’s benefit so that your spouse can begin earning your benefit at age 66.
- Please note that only one spouse can file and suspend without penalty.
For those born after 1953:
If you were born after 1953, you are no longer able to file a restricted application and collect a spousal benefit. Frankly, we have been telling you for some time that this loophole would go away, so this comes as no surprise.
- What has NOT changed for all eligible beneficiaries:
Contrary to many writings on the topic, every Social Security beneficiary has the ability to file and suspend his or her own benefit.
- In most cases, this is done from normal retirement age (66) until age 70, and allows the benefi- ciary to earn 8% more per year through to age 70.
- “If you are, or formerly were, a married couple and do not need your social security benefit at full retirement age, deferring one spouse’s benefit to age 70 has the benefit of increasing the lifetime payout for at least the longest surviving spouse. THIS IS THE MOST IMPORTANT FACT OF
SOCIAL SECURITY! It remains the fact that if one spouse dies, the surviving spouse will receive the higher of the two spousal benefits.
- Therefore, in the majority of cases, we will advise the spouse with the higher social security bene- fit to file and suspend his or her benefit to age 70. This can increase the higher benefit by 24- 32%!
What changes could still occur to your Social Security benefit in the near future?
I want you to study Line 37, the Adjusted Gross Income (AGI), of your Personal Tax Return Form 1040 this year!! If your AGI is near or above $170,000 married filing jointly or $85,000 single, I believe it is possible that you could lose at least 20% of your Social Security benefit. Why do I believe this? Be- cause it is already the case for Medicare Part B premiums. Those whose AGI exceeds the $170K/$85K threshold are paying 40%+ more for their monthly premiums than those whose AGI is below the threshold. Since this was created by the current congress and their goal is to create ways to save this equally-troubled benefit, I fully expect Congress to apply this same means test to Social Security.
Therefore, if your AGI is near or above the $170K/$85K threshold, you just need to plan effectively through retirement so that you stay below these values or we can review how these reduced benefit payments affect your ability to retire comfortably. One easy method
for staying below the line is to gift to charity(ies) to reduce your taxable income. There are many other income strategies that we can
implement in coordination with your tax advisor so that you can receive the greatest possible benefit through retirement.
We’ll continue to follow all financial planning updates to keep your family and assets properly protected and allow you to live the life that you want through retirement.