The House passed the legislation 222-167 and now the bill moves to the Senate.
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Fans of The Walking Dead may not be familiar with the term, but Landis says Americans have a chance to zombify their Social Security benefits.
“The notion that you ought to have a financial adviser to benefit from all the provisions in the Social Security program is offensive to us”, said Web Phillips, the senior legislative representative of the National Committee to Preserve Social Security and Medicare.
It didn’t take long for a few smart folks to realize that proponents of this Act threw it together very quickly, opening the door to additional ways to claim Social Security.
When it comes to Social Security, though, there’s a financial monkey wrench that can complicate sorting out your plan. When the husband switches to his own benefits at age 70, have the wife suspend her benefits in order to get delayed retirement credits.
For example, Section 813 outlines “new and stronger penalties” for those found guilty of conspiracy to commit Social Security Fraud, and Section 824 allows for Social Security to enter into information exchanges with payroll providers to ensure the accuracy of benefits due and eligibility of claimants. Assuming his full retirement age is 66, postponing the start of his benefit for four years means the husband’s check will be at least 32% larger.
This is a popular strategy for couples where both have worked and earned Social Security benefits. Let’s assume the wife is the higher earner this time.
Under file and suspend, married workers can file for Social Security and then immediately suspend their benefits. If you still have earned income from work, and are eligible to contribute to an IRA, then doing so can help you shelter more of your Social Security benefits from tax.
Starting in six months, new retirees won’t be able to claim their benefits this way. As she approaches age 70, she tells Social Security to drop her spousal benefit and, instead, begin paying her own. Wait until you are 70, and the amount of your monthly check goes up even more.
Anyone who is younger than 62 at the end of 2015 will not be permitted to collect just spousal benefits in the future. Entmacher says this expiration also applies to divorced spouses who might want to use this strategy.
The budget bill calls these changes “loopholes”. Critics say it was mostly used by high-income Americans who were gaming the system. I explained these strategies in recent blogs as a way to bring couples upwards of ,000 more in total Social Security benefits.
All of this is subject to further revision as it is unclear exactly how the details will play out, but it looks at this point as if people now running the file and suspend strategy will be grandfathered in and are not scheduled to be affected by the legislation (this was not the case with the first draft of the bill). This will be helpful if the spouse is older and will be collecting benefits anyway.
Closing these two strategies is not going to solve Social Security’s long-term funding gap!
The strategy costs the Social Security Administration several billion dollars a year in revenue, according to estimates, and is seen as a “loophole” that benefits mainly the wealthy.
Generally, the longer you wait to start receiving your checks, the higher your monthly benefit will be.
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Trying to plan with Social Security benefits can be extremely complex, especially when you have other forms of income that you have to deal with. The views expressed in this article are only those of Ms. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content.
