The Evolution of Social Security Planning
I’m Hady LaGrotta, Vice President of Planning at Holland Financial. As a Chartered Financial Consultant® and a National Social Security Advisor ℠, I analyze clients' portfolios and work closely with David Holland to select investment strategies and insurance products (annuities, long-term care and life insurance) to incorporate into plans to meet our clients' income needs. David asked me to fill in for him this week so I could brief his readers on the three changes to Social Security (SS) I learned during a recent seminar in Washington, D.C.
The Bipartisan Budget Act of 2015 included three sections that change Social Security benefits. In summation, they state: 1) A 179-day window of opportunity was granted (through April 29, 2016) to those who were age 66 by May 1, 2016, to exercise the old “File and Suspend” strategy; 2) People who turned age 62 by January 1, 2016 keep the option to file a “Restricted Application” based on a spouse’s, or former spouse’s, earnings record (as long as the spouse is drawing benefits) and can defer drawing on their own benefits until a later date; 3) People turning 62 after January 1, 2016 will no longer have the option to use either strategy mentioned in #1 or #2.
Since the “File and Suspend” strategy is no longer available, I want to share with you a recent “Restricted Application” scenario. “Tom,” age 65, and “Susan,” age 64, would be able to draw their benefits based on part 2 of the new law. They are planning to retire at age 66, so they thought they had missed the boat for optimizing their benefits. Tom’s monthly SS benefit at age 66 is $2,408; Susan’s is $1,788. After reviewing their finances, I recommended that Susan wait two years until age 66 and then draw her benefits of $1,788 a month. Tom, 67 at that time, would then file a “restricted application for spousal benefits” and get $888 a month (based on Susan’s work record). This would allow Tom to delay and increase his own benefits by 8% a year until age 70 (at which time his benefit would be $3,631 a month). Not counting future cost of living increases, this strategy increased Tom’s lifetime monthly benefit by $1,223! With careful planning, Tom and Susan will enjoy $2,676 a month the first four years of their retirement and $5,419 thereafter. Should Susan outlive Tom, she will also get his bigger $3,631 monthly benefit for the rest of her life.
Not sure what to do about Social Security? We can review your situation and use specialized software to determine the best claiming strategies for your situation.