Retire Safe & Tax Free - Goodbye to Two Social Security Claiming Strategies

...Budget Deal Ends Lucrative Social Security Maneuver

The budget deal the White House and congressional leaders hammered out Monday would shut down two popular Social Security claiming strategies that married couples have come to rely on to squeeze the maximum from their retirement benefits.

The bill, which passed the now moves to the Senate, would end to strategies that combined can add tens of thousands of dollars to a couple's lifetime retirement income, in part by allowing one spouse to claim as many as four additional years of a spousal benefit. The strategies under fire - known as file-and-suspend, and restricted application for spousal benefits - attracted interest in the wake of a 2000 law that allows Social Security beneficiaries to voluntarily suspend their checks after they had applied for benefits. While it wasn't the law's intent, the option to file and suspend made it possible for a worker's spouse to start collecting a benefit based on the worker's earnings record while the worker took advantage of delayed retirement credits. Those credits increase a worker's benefit by 6 to 8% for each year he or she delays claiming between the ages of 66 and 70.

In recent years, the Obama administration has targeted the strategies - which detractors have termed aggressive - in its annual budget to raise revenue. Currently only about 100,000 individuals are taking advantage of one of the strategies according to the nonpartisan Center for Budget and Policy priorities. However, the popularity of the strategies and their cost Social Security would undoubtedly increase in the future as large numbers of baby boomers retire.

Starting six months after the budget bill goes into effect, Social Security will no longer allow family members to submit a new claim for spousal benefits on a suspended benefit. Effectively this means that the classic Social Security optimization strategies are mostly off the table. Under the bill, anyone 62 or older this year will retain the ability to file a restricted application at age 66 or older to receive only a spousal benefit. But they will be able to do this only if their spouse is already claiming a benefit. For those younger than 62 this year the restricted application strategy will longer be available.

Marc H. Weiss, Archer Weiss Insurance & Financial Services, Inc. Please Call Toll free: 1-800-831-2901 or (818) 610-8560