So the heyday is over, file and suspend under the old rules is gone forever as of April 30, 2016. Those were the days, my friend. We thought they’d never end. We’d file and suspend forever and a day. But not any more… Or, may we still file and suspend? Of course we can still file and suspend, the rules are just more restrictive now. When you suspend your benefits these days, all benefits that are payable based upon your record are suspended as well. For example, if you have a child who is eligible for benefits based on your record, when you suspend your benefits the child’s benefits will be suspended as well. The same goes for spousal benefits based on your record. To be clear, the rules about suspending benefits are: You must be at least Full Retirement Age When you suspend benefits, your own benefit will not […]
Social Security
Break Even Points for Social Security Filing Ages
Last week my article 3 Myths About Social Security Filing Age included some information about year-to-year break even points for the various Social Security filing ages. This prompted some questions about the break even points between all filing ages, not just the following year. So for example, what are the break even points between choosing to file at age 62 versus age 66 or age 70? This article shows the approximate break even points between all of the various filing ages. The first chart shows the break even points when your Full Retirement Age is 66. To use the chart, select your first filing age decision on the left, then move right to the second filing age you’re considering: So, for the decision between filing at age 62 versus age 66, you can see that the break even point is at the age of 78. Comparing filing at age 66 with […]
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Restricted Application – the Definitive Guide
Much has been written and discussed regarding the option to file a Restricted Application for Social Security spousal benefits, but there are still many, many questions. This article is an attempt at covering all of the bases for you with regard to restricted application. The topic of restricted application is so popular these days because it’s being eliminated as a result of the Bipartisan Budget Act of 2015 (BBA15). In fact, if you were born on or after January 2, 1954, the changes to the rules have eliminated the option to file a restricted application for you altogether. So – unless you were born on or before January 1, 1954, you might as well stop reading, because restricted application is not available to you. Period. Restricted Application Rules Okay, if you’re continuing to read, you (or your client, if you’re an advisor) must have been born early enough to be […]
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What Must I Do Before April 30, 2016?
There is a great deal of confusion surrounding the new Social Security rules that were put into place with the Bipartisan Budget Act of 2015 (BBA15). The part that is bothering folks the most right now is the deadline that is coming up, on April 30, 2016. What’s important about April 30, 2016? What must I do before April 30, 2016? The rule changes in BBA15 indicated that the suspension of Social Security benefits would be treated differently beginning 180 days after passage of the law. The law was passed on or about November 2, 2015, and so 180 days after that is April 30, 2016. What’s the change? First of all, in order to suspend your benefits, you must be at or older than Full Retirement Age (FRA). For folks who will be eligible to take advantage of the old suspend rule, that means you must be 66 before […]
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New Deemed Filing Rules
When the Bipartisan Budget Act of 2015 was passed, there were a few changes made to Social Security rules. One of the rules that changed significantly is the deemed filing rule. The old deemed filing rule The current or old deemed filing rule works as follows: When an individual who is under Full Retirement Age (FRA) is eligible for a spousal benefit in addition to a benefit based upon his or her own record files for either benefit, he or she is deemed to have filed for all benefits that he or she is eligible for at that time. At any other time (other than the time of application for benefits) deemed filing does not apply. For example, Anna and John are both nearing 62 years of age. Anna has a PIA (FRA benefit) of $800, and John has a PIA of $2,000. Anna is planning to file for her […]
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Everything You Need to Know About File & Suspend and the April 30 Deadline
By now if you’re of a certain age, you have probably heard about the end of the file & suspend option for Social Security benefits. If not, click on this link to learn more about this option and the April 30 deadline due to changes made by the Bipartisan Budget Act of 2015. However, as my email inbox indicates, you have lots of questions about file & suspend. This article is my effort to cover all the bases with regard to everything you need to know about file & suspend and the April 30 deadline. For starters, if you and your spouse were born after April 30, 1950, this article does not apply to you, so you can stop reading. If one of you was born before April 30, 1950, the file & suspend option only applies to that individual, not to both of you. Of course, if both of you were born […]
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6 Strategies for Social Security Benefits That Are Still Available
Earlier this fall the Bipartisan Budget Act of 2015 was passed. This was important to folks looking to maximize Social Security benefits because two of the primary strategies for maximization were eliminated with the passage of this legislation. You may be wondering if there are any strategies left to help maximize benefits – and as it turns out, there are still a few things you can do. Four of these strategies apply to anyone, while the last two only apply to married couples. (Note: if you were born in 1953 or before, you have more options available to you as a result of the grandfathering of some rules. See The Death of File & Suspend and Restricted Application for more details.) Delay Delaying benefits beyond age 62 or your full retirement age (FRA) continues to provide a strategy for increasing your benefits. In fact, this strategy alone is likely the most beneficial of […]
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Social Security Ground Rules
(In celebration of the release, here is an excerpt with some extras, from A Social Security Owner’s Manual, 4th Edition.) There are certain rules that will be helpful to fully accept as facts while you learn about your Social Security benefits. If this is your first reading of the list, skim through before moving on. Don’t expect to fully understand these rules on the start – but keep in mind you may need to refer back to this list of Ground Rules from time to time so you can keep things straight. Basic Social Security Rules The earliest age you can receive retirement benefits is 62. The earliest age you can receive Survivor Benefits is 60 (50 if you are disabled). Filing for any benefit before Full Retirement Age will result in a reduction to the benefits. Your spouse must have filed for his or her retirement benefit in order […]
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Social Security Bend Points for 2016
When the Social Security Administration recently announced that the maximum wage base and the Cost-of-Living Adjustment (COLA) would remain unchanged for 2016, they also announced the bend points that are used to calculate both the Primary Insurance Amount (PIA) for Social Security benefits. In addition, the Family Maximum Benefit (FMax) bend points for 2016 were also announced. Wait a second! You may be wondering just why the bend points are changing when there was no increase to the COLA? Excellent question, as it shows you’ve been paying attention. This is because the bend points are based upon the Average Wage Index, which adjusts annually regardless of whether the numbers go up or down, whereas the COLA and the maximum wage base only goes up. Bend points can go down from one year to the next – it’s only happened once, in 2009, but it could happen again. For more on […]
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No Social Security COLA for 2016; Wage Base Unchanged as Well
Recently the Social Security Administration announced that there would be no Cost of Living Adjustment (COLA) to recipients’ benefits for 2016. This is the third time in 7 years that there has been no adjustment. In 2010 and 2011 we saw the first ever zero COLA years since the automatic adjustment was first put in place in 1972. That dark period of time actually resulted in two years in a row with zero COLAs, after 38 years of increasing adjustments. Why? The Cost of Living Adjustment (COLA) is based upon the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. If this factor increases year-over-year, then a COLA can be applied to Social Security benefits. This is an automatic adjustment, no action is required of Congress to produce the increase when there is one. See How Social Security COLAs Are Calculated for details on the calculations. When […]
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The Death of File & Suspend and Restricted Application
The Bipartisan Budget Act of 2015’s Aftermath Note: the original text had a placeholder date of May 3, 2016 as the final date for File & Suspend. This date has been finalized as April 30, 2016 and the text below corrected. — jb With the passage of the Bipartisan Budget Act of 2015, an era of flexibility in Social Security claiming strategies comes to an end. Long gone is the ability for one spouse to delay benefits while the other collects benefits based on the first spouse’s record. Also gone is the option of collecting spousal benefits while delaying your own benefits to accrue the delay credits. We’ll go over the actual changes below, based upon your date of birth – because some of the provisions will remain for a while, and could be useful if you’re the right age. Born in 1953 or earlier If you were born in […]
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Get some now, get more later
Note: with the passage of the Bipartisan Budget Bill of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. When you have reached Full Retirement Age (FRA – age 66 if you were born between 1946 and 1954), you have the option to file for Spousal Benefits separately from your own benefit. This is known as a restricted application – and is often referred to as “get some now, get more later ”. Of course, you must either be married to another Social Security recipient who has filed for benefits, or you have divorced after 10 years of marriage to someone who is at least 62 years […]
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Exception to the Divorced Spouse Remarriage Rule
Generally speaking, when a divorcee is receiving a Social Security spousal benefit based on an ex-spouse’s record, the recipient must remain unmarried in order to continue receiving the ex-spouse benefit. (For more details on this, see Coordinating Social Security Benefits in Matters of Divorce and Remarriage.) In many cases,when a divorcee remarries, the spousal benefit based on his or her ex-spouse’s record will end. However, there is an exception to this rule that I recently became aware of. It’s in part because the circumstances surrounding this exception have recently become more common – so let’s get to the exception. The Exception If the person who is receiving a spousal benefit based on an ex-spouse’s record marries someone who is currently receiving widow(er)’s, mother’s, father’s, divorced spouse’s, or parents’ benefits, the spousal benefit will continue. That’s a mouthful! Let’s play out an example: Jane is divorced from Gerald. Jane has been receiving […]
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Timing of Delay Credits
When you delay filing for your Social Security benefits past Full Retirement Age (FRA – age 66 if you were born between 1943 and 1954) you earn Delay Credits for each month that you delay. The credit amount is 2/3% per month, or a total of 8% for every 12 months of delay. When you file for benefits after delaying, these credits are applied to your PIA. The timing of the application of your credits is not immediate, though. Delay credits are added to your benefit only at the beginning of a new year, so this can cause a bit of confusion as you begin receiving benefits. Example For example, Janice was born on October 14, 1949, so she will turn age 66 on October 14, 2015. Janice’s PIA is $1,000. If you’ll remember from this post (When is Your Social Security Birthday), Social Security considers Janice to have reached […]
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Social Security Trustees Report – 2015
Every year, the Trustees of the Social Security and Medicare trust funds release reports to Congress on the current financial condition and projected financial outlook of these programs. The 2015 reports, released on July 22, 2015, show that, despite some encouraging signs, both programs continue to face financial challenges that should be addressed as soon as possible, with the Disability Insurance Trust Fund needing the most urgent attention. What are the Social Security trust funds? The Social Security program consists of two parts. Retired workers, their families, and survivors of workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. The combined programs are referred to as OASDI. Each program has a financial account (a trust fund) that holds the Social Security payroll taxes that are collected to pay Social Security benefits. Other income […]
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Delayed Retirement Credits for Social Security
When you delay filing for your Social Security retirement benefit until after your Full Retirement Age (FRA), your future benefit increases due to a factor known as Delayed Retirement Credits, or DRCs. These credits accrue at the rate of 2/3% for each month of delay, which equates to 8% for every full year of delay. It’s important to know a few facts about DRCs. For one – the delayed retirement credits are accumulative, not compounding. If your Full Retirement Age is 66 (if you were born between 1943 and 1954), you can accrue a full 32% in DRCs. This means that the amount of benefit that you would normally receive at FRA (which is your Primary Insurance Amount, or PIA) would be multiplied by 132% at your age 70. If your FRA is above age 66, your maximum delayed retirement credit is something less than 32% – as little as […]
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Divorcee Social Security Planning
If you’re planning to retire and you’re a divorcee, you may be entitled to additional retirement benefits based on your ex’s earnings record. This can be quite a boon for an individual whose ex-spouse has had a significant earnings record over his or her lifetime. Especially so, if your own benefit is lower because you didn’t work outside the home for a significant number of years. You may be eligible for this additional benefit if you are at least age 62, your marriage lasted for at least ten years, and your ex-spouse is at least 62 years of age (and therefore eligible for Social Security benefits). If your ex hasn’t filed for his or her own Social Security benefit, the last factor is that your divorce must have been final for at least two years. If your ex has filed for benefits, this time limit is eliminated. How Can You […]
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Will Work After Retirement Age Increase My Social Security Benefit?
This question comes up every once in a while: Will work after retirement age increase my Social Security benefit due to the additional earnings going on my record? The answer, as with many of these calculation-type questions, is a fully-qualified “maybe”. The amount of your earnings from work in any year may have a positive impact on your benefit – not just work after retirement age. On the downside, depending upon your benefit amount it may not be much of an increase. The reason it’s not certain whether work after retirement age will increase your benefit is because of the nature of the calculations involved. If you’ll recall from the article on calculation of your Primary Insurance Amount (PIA) – the foundation of this calculation is a figure called your Average Indexed Monthly Earnings, or AIME. The AIME is an average of the 35 highest indexed earnings years in your […]
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Social Security Earnings Test
When you’re receiving Social Security benefits before your Full Retirement Age (FRA, which is age 66 ranging up to age 67 for folks born in 1960 or later), there is an earnings test which can reduce or eliminate the benefit you are planning to receive. If your earned income* is greater than $15,720 (2015 figure), for every $2 over this limit, $1 will be withheld from your Social Security benefit. So, for example, if you earn $20,000 in 2015, a total of $2,140 in benefits will be withheld – 50% of the over-earned amount of $4,280. If you are receiving a Social Security benefit of $1,070 per month, this means that 2 months’ worth of benefits will be withheld. This can come as a surprise if you’ve been receiving the full benefit and the earnings test is applied at the beginning of the following year, when you don’t receive a […]
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Mandatory Retirement Plans
A few weeks ago I finished a paper arguing for mandatory retirement contributions from both employers and employees. Though arguably the paper will not come close to changing public policy on retirement plans, it did raise some arguments in favor of the United States adopting a mandatory savings plan. In the paper I explained that research has shown that individuals risk not having enough saved for retirement. This could be due to employees not having a retirement plan through work or because employees face an abundance of mutual fund options in the plan that they don’t know where to begin. Some of these employees choose the default option or simply go with what a colleague recommends. Another problem the paper addresses is the declination of defined benefit pensions. Such pensions are employer sponsored and funded, thus removing funding an investment risk from the employee. At retirement the employee receives a […]
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