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Budget Bill Changes Social Security Claiming Landscape
Shortly after 12:00 noon on Monday, November 2, 2015, the President signed the two-year budget bill into law. The bill contained some amendments to the Social Security Act that will curtail some claiming strategies that have been both useful to and popular among individuals and couples across the socioeconomic landscape.
How the Rules Were Changed
The changes focus on two areas:
- Deemed filing rules, including the restricted application for spousal benefits only
- Voluntary suspension rules, including the file and suspend technique
The current deemed filing rules provide that if you apply for any retirement benefit before reaching Full Retirement Age (FRA), you are deemed to be applying for all retirement benefits for which you are eligible. This means that if you file for your own retirement benefit and are also eligible for a spousal retirement benefit, or vice versa, you will be treated as though you applied for both. In other words, you cannot restrict your application to one or the other.
However, once you reached FRA, you could file an application restricted to spousal benefits only, which would allow you to receive some spousal benefits while your own benefits were growing at 8% per year.
The new law extends the deemed filing rule to age 70, thus eliminating the ability to collect spousal benefits while allowing your own benefits to grow.
The current voluntary suspension rules allow you to suspend your benefits after you reach FRA. This includes situations where you might file an application for your benefits and then immediately suspend payments.
Why would anyone want to do this? Because Social Security rules have long provided that no one can claim benefits on your record (while you are alive) until you have filed an application for benefits on your own record. For the past 15 years, the rules have permitted other family members – such as your spouse, dependent minor child, disabled adult child, or dependent parent – to receive benefits on your record even though you had suspended payments.
The new law provides that when you suspend your benefits, no one may claim benefits on your record until you begin or resume receiving payments. A person who has filed for his or her own benefits can still suspend after Full Retirement Age, but only for the purpose of increasing their benefits.
Effective Dates and Opportunities
Although most of the advantages of file and suspend will no longer be available once the law takes full effect, and the ability to file a restricted application for spousal benefits only will also be lost for many, there are some silver linings to be found within the grandfather provisions of the new law:
Deemed Filing/Restricted Application for Spousal Benefits Only:
- Spouses (and divorced spouses) who were born on or before January 1, 1954, will be exempt from the new rules governing deemed filing and restricted application.
- If you qualify for grandfathering, as just described, you will be eligible to file a restricted application between ages 66 and 70, provided that (a) your spouse has filed for his or her own benefits; and (b) if your spouse has suspended benefits, he or she has done so within the period described in the section below. [Note: if you are otherwise eligible for divorced spouse benefits, it does not matter whether or not your ex has filed or if his or her benefits are in suspension, as long as your ex is at least 62.]
- If under the grandfather, you file for your own benefits before 66 and your spouse subsequently files for his or her own benefits, you will not be deemed to have filed for spousal benefits.
Voluntary Suspension of Benefits:
- The new provisions regarding voluntary suspension of benefits will not apply to you if you have filed for your benefits and requested suspension before April 30, 2016.
- To take advantage of this opportunity, you would need to have been born on or before May 1, 1950.
- If you are successful in suspending your benefits before the effective date of the new rules, then the following people may be eligible to claim on your record while your benefits are under suspension:
- Your spouse who attained age 62 on or before January 1, 2016
- Your spouse who cares for your minor or disabled adult child
- Your minor or disabled adult child
- Your dependent parent
Recommended Action Steps:
- If you or your spouse were born on or before May 1, 1950, have an analysis done by a professional to determine whether or not it is to your advantage to suspend during the 180-day window that closes on April 30, 2016.
- File and suspend can have negative consequences for a couple’s overall benefit situation; don’t do it without good reason.
- Even if file and suspend produces positive results for a couple, there may be superior options available.
- If you or your spouse were born on or before January 1, 1954, have an analysis done by a professional to determine whether and under what circumstances it would be to your advantage to file a restricted application. Remember that the deemed filing rules under the old law continue to apply before you turn 66.
- If neither you nor your spouse is eligible for grandfathering based on your dates of birth, opportunities for creative benefit claiming may not be quite as plentiful as they were before these changes. However, the gap between the claiming strategy that fits you best and one that fits you least well could still amount to many, many thousands of dollars. Have an analysis done by a professional to see the full spectrum of claiming strategies that could work best for you.
Peter M. Weinbaum, JD
How Many Thousands of Dollars of Social Security Benefits Will YOU Leave on the Table?
What if you discovered that what you don’t know about Social Security could result in your walking away from potentially thousands of dollars of additional income? It happens to others, literally every day.
One recent study reports that anywhere from 46% to 59% of those who became eligible during the last two decades claimed Social Security retirement benefits as soon as they reached age 62. But filing too early is not the only way you can leave money on the table.
Many people view the claiming decision as a simple one: should I take it now or should I wait? If I delay claiming benefits, how long would I have to live before I would “break even” compared to claiming earlier? Very often the decision only seems simple because an individual or couple is unaware of multiple options, many of which are not common knowledge, that may be available to them.
In fact, the Social Security retirement system is NOT simple. Married couples can often employ a variety of claiming strategies to enhance their retirement income; special options may come into play if you were previously widowed or divorced. However, if you don’t know about these options you cannot make informed decisions that could help you and your spouse avoid losing thousands of dollars of income to which you might otherwise be entitled.
Consider this situation:
When we first began talking about Social Security, Richard was a successful attorney, still active in private practice and earning a very good living. He was 67, and had already made the decision to delay claiming his benefits until age 70. His wife Jayne was approaching 62, wanting very much to retire and begin collecting her benefits as soon as possible. One strategy I showed them, and which they implemented as soon as Jayne reached 62, allowed them to do exactly what they had wanted to do – and it provided them with more than $15,000 of additional income over the first 30 months. They would have totally missed this opportunity but for a casual conversation that led them to seek my advice.
My work helps real people make informed decisions about their Social Security benefits: married people and divorced people; widows and widowers; spouses who are the same age and spouses who are years apart; people who “don’t need” Social Security and people who depend on it to make ends meet; people who are eligible for the maximum retirement benefits Social Security has to offer, as well as stay-at-home moms and “house spouses” who don’t have enough Social Security “credits” to qualify for benefits on their own work records.
My process is simple: I gather relevant information about you and your spouse, or former spouses; learn a little bit about your financial needs and goals in retirement; and put together a comprehensive analysis illustrating the most promising options available to you. I then encourage you to share my work with your financial advisor so that your Social Security claiming decisions can be made in the larger context of your overall retirement income and survivorship planning.
 Social Security Claiming: Trends and Business Cycle Effects by Owen Haaga and Richard W. Johnson (Published by the Center for Retirement Research at Boston College, April 2012)
Peter’s consulting services are an absolute MUST for anyone who is engaged in retirement planning or getting ready to claim Social Security benefits. Had I availed myself of this type of assistance at the appropriate time, it would have meant an additional $24,000 to me and my wife over a four-year period.
In fact, even if I had approached him halfway through that four-year period, we would have been able to recover about $15,000. But he had not yet begun his practice at that time, and I am not familiar with anyone else who does this kind of work.
Peter’s creative approach to claiming strategies and encyclopedic knowledge of this subject area goes into every handcrafted report he prepares for his clients, resulting in an incredible value for individuals and couples of all descriptions.
I also had the opportunity to attend Peter’s presentation to an audience of over 100 people at the Vermont State Employees Credit Union annual meeting in March 2014. The one word that comes immediately to mind is: COMPELLING!Jerome “Jerry” Diamond
There may be literally dozens of Social Security claiming options available to couples, as well as to individuals who have been widowed or divorced. Typically, two to four options will emerge as representing the most promising choices in relation to your priorities and your particular situation. The heart of my Social Security consulting practice is to perform an analysis of your most promising Social Security options and present them in a comprehensive, handcrafted written report, which you are encouraged to share with your financial advisor.
It is my opinion that Social Security claiming decisions should not be made in a vacuum. Social Security is simply one piece – often a very important piece – of your overall retirement planning puzzle, and I encourage you to work closely with your financial advisor to put all the pieces together.
Process. You fill out an e-form questionnaire and upload PDF copies of your most recent Social Security statements for you and your spouse. Or you may download a PDF version of the questionnaire then scan and email it to me along with PDF copies of the statements. After I have had a chance to review that information, we might have a brief telephone conversation to make certain I understand your priorities and preferences for your Social Security benefits. If I think you could benefit from my Social Security consulting services, I will quote you a fee and you can decide whether that works for you.
Social Security Consulting for Professionals
Financial services professionals and CPAs in particular may have client situations that require my expertise, but not to the extent of a complete analysis and report. This could be anything from the answers to a few specific questions to a comprehensive analysis, but without the written report. I provide this kind of service on either an hourly basis or for an agreed upon fee. Individuals and couples may also take advantage of this hourly Social Security consulting service.
Social Security Seminars
In the course of a year, I present approximately 20 Social Security seminars to audiences such as the following:
- Public groups
- Private client groups
- CPAs, attorneys, and financial services professionals
- Employee groups
Most seminars run for 1.5 – 2 hours, although the length can be adjusted to meet the needs of the seminar sponsor. The vast majority of my Social Security seminars are presented in person to live audiences, but I have used the webinar format as well. These are not canned presentations: all seminars are hand-crafted by me and tailored to fit the particular audience. Fees vary with the context, the location, and the nature and size of the group.
According to Wikipedia, a maven is “a trusted expert in a particular field, who seeks to pass knowledge on to others. The word ‘maven’ means one who understands, based on an accumulation of knowledge.”
Peter Weinbaum began focusing on Social Security benefits in 2010 and officially launched his Social Security consulting practice in 2012. He regularly provides Social Security consulting to individuals and couples on their benefit options, and presents approximately 20 Social Security seminars and webinars during the course of a year.
For nearly three decades before becoming a Social Security consultant, Peter led the advanced planning unit at a major mutual life insurance company, consulting with financial services professionals, attorneys, and CPAs in relation to their clients’ estate, business, and retirement planning arrangements. During that time, he worked with advisors to some of the wealthiest families in America, while also assisting thousands of working people and small business owners by providing technical back-up to their advisors.
Peter earned his Bachelor of Arts from Harvard University in 1967 and his Juris Doctor from the University of Michigan Law School in 1970. He was admitted to practice law in Massachusetts (1971) and in New Hampshire (1978). He also holds a Master of Education in counseling from the University of New Hampshire. He has earned the Chartered Life Underwriter and Chartered Financial Consultant designations, and was formerly a Registered Representative and an Investment Advisor Representative through Equity Services, Inc.
Before embarking on his career in the financial services industry he worked at a small Boston law firm, served for four years as Assistant Dean at Vermont Law School, and spent several years in college and university administration.
For over 20 years he has been an active member of the Board of Directors of the Small Business Council of America, which presented him with the Connie Murdoch Award for outstanding service in 2002.
View Peter’s LinkedIn profile.
The Social Security Maven® is a registered trade name of Stillpoint Associates, Ltd.
I can’t thank you adequately for your swift, professional and excellent advice on our rather tricky Social Security question. Your answer was creative, not obvious, and especially timely. You obviously are the “go to” person for anyone with Social Security issues. It’s wonderful to speak with someone who knows their stuff – and is creative and super-timely to boot!
I have over thirty years’ experience in financial planning with clients throughout Vermont, and wish I had known of your services many years earlier. You’d have saved me countless gray hairs, and my clients significant sums of money. Thank you for providing such a valuable service, and for doing it so beautifully.
Very much obliged to you!Amy Leavitt
For many years I have known Peter as a very accomplished estate planning attorney who has worked on many sophisticated and elaborate strategies to maximize retirement savings and income. When I heard he was now focusing on Social Security I was intrigued because that seems so simple compared to what he had been doing.
Turns out, it’s just not that simple. In fact, it’s surprisingly complicated, but Peter is very clear and thorough, and has developed his usual deep insights into the many nuances of the program. We had him take a look at our situation and he was remarkably helpful in describing several strategies we should consider to optimize our decisions about when and how each of us should take our Social Security benefits.
He customizes his work to your specific circumstances and his insights will help you make the most appropriate decision for your family. He doesn’t waste any time either so I found the process refreshingly simple yet impactful.
I highly recommend Peter to anyone approaching Social Security retirement age.Thomas H. MacLeay