Social Security Changes -- What it Means to Your Future Retirement Income & Security!Submitted by Miller Premier Investment Planning, LLC on April 11th, 2016
On November 2, 2015 President Obama signed into law the "Bipartisan Budget Act of 2015." Unfortunately, Social Security just got more complicated and many Americans are scrambling to figure out what these recent changes mean for their specific situation and whether they need a backup plan. One significant change is the elimination and/or limitation of two Social Security filing strategies: file and suspend and restricted application. These two strategies are often used by two-income married couples in order to increase their lifetime benefits. There are two different grandfather provisions that are available: 1) File & Suspend will still be available to those who turn 66 or older on April 30, 2016 and act before May 1st, 2016. 2) Restricted application will still be open to those age 62 or older in 2015 (Born January 1, 1954 or earlier) at full retirement age (FRA.) Failure to make decisions on these options prior to their respective deadlines could be a very costly mistake for retirees and can literally mean leaving over $100,000 in lifetime benefits on the table. While determining when and how to claim Social Security benefits has always been challenging, the new rules create even more complexity for those nearing retirement. Therefore, it is extremely critical that retirees and soon to be retirees sit down with a fee-only retirement specialist immediately to determine which strategy is best for them and when to implement.
What about everyone else not covered by the grandfather provisions -- is Social Security planning still important for them? You bet it is! Social Security is even MORE important now. Cumulative Social Security benefits represent a substantial sum of money -- for most Americans it is even greater than their 401k balance. Social Security benefits can add up to over $1 million in additional lifetime payouts for many families if done properly. The amount of personal savings required to generate these kinds of lifetime payouts is huge! Therefore, the best and easiest way for you to improve your standard of living and make your money last longer in retirement is by maximizing your Social Security benefits with a smart claiming strategy. While the Bipartisan Budget Act of 2015 has made Social Security claiming strategies more complex and confusing, three key themes have emerged.
First, there are smarter strategies that both maximize your cumulative benefits and reduce the likelihood of you outliving your money in retirement (longevity risk.) There are not-so-obvious strategies that can result in tens of thousands more dollars in payouts as well as help to protect your family if someone should live longer than expected. These smart strategies can apply to you whether you are a married couple, a family with young children, a widow(er), or a divorcee.
Second, everyone should holistically compare and evaluate multiple claiming choices. Social Security is still not a "one size fits all" decision. Your personal preferences, savings, circumstances, concerns, and life expectancy impact which strategy is best for you. Each of these factors contribute to a set of tradeoffs to the claiming decision and should be considered in a holistic retirement income plan. A side-by-side comparison of claiming strategies should be conducted and measured against the impact of required tradeoffs. Only then can the best claiming strategy be selected for your specific situation.
The last theme is the need to "coordinate" a Social Security claiming strategy with how and when you draw from your retirement savings (withdrawal strategy.) A great withdrawal strategy is dependent on how you claim Social Security. For example, a person who claims Social Security early will need to withdrawal less from their personal savings in the first phase of retirement because Social Security is supplementing their income needs during this phase. For those individuals who decide to begin benefits later in retirement, more must be withdrawn from personal savings during those early years to make up for the lack of benefit payouts. Research published in the Journal of Financial Planning confirms that maximizing Social Security benefits can add over 10 years of longevity to most people's retirement portfolios. How and when a retiree claims benefits impacts the sequence of how and when savings should be tapped for withdrawal. For example, should you withdrawal from tax deferred accounts such as a 401k or IRA first or from accounts that have already been taxed such as a regular brokerage or savings account? Your Social Security claiming decision significantly impacts your personal withdrawal sequence as well as which accounts and holdings you should tap first versus last. Smart coordination maximizes how long your retirement savings will last by minimizing your taxes, required minimum distributions, and Medicare costs.
Changes in the employer retirement plan landscape over the past couple of decades means Social Security has become a more vital piece to the retirement puzzle. Contrary to popular urban legends -- Social Security is not going away because of this fact. However, it will continue to change in order to stay solvent now and in the future. 2016 presidential candidates have proposed solutions ranging from raising the full retirement age, increasing the maximum taxable earnings, to reducing benefits paid out in order to shore up Social Security. These new rules make retirement and Social Security planning even more complex for younger generations. An experienced and competent fee-only planner specializing in retirement planning and Social Security maximization can help navigate thru these changes and save valuable time, money, reduce longevity risk, and bring peace of mind.
To receive a easy & quick online retirement checkup click here. As an experienced retirement planning expert I stand ready to help you navigate thru all of these recent changes and help you determine which Social Security claiming strategies are best for you. For a complimentary consultation please feel free to give me a call at 817-680-8198 or send me an email to firstname.lastname@example.org.