Social Security Updates for 2016

File and Suspend – This strategy was affected the most by the changes to the law. To be eligible for this strategy, you must turn age 66 and File and Suspend by April 29, 2016. If you do not file by this date, then the strategy can no longer be applied. Anyone who was able to use this strategy previously will be able to continue with their benefit and it will remain unaffected.

Restricted Application – The Restricted Application Strategy has been modified as well. To be eligible to use the strategy, you must have turned age 62 by December 31, 2015. If you are 62 or older before this date, then you are grandfathered into this strategy. Once you reach your Full Retirement Age (FRA), you can then file a Restricted Application.

Filing for Back Payments – This strategy is no longer eligible and cannot be used after April 29, 2016.

More than ever, it’s essential to understand the benefits and the risks of delaying. Delaying your benefits to at least your Full Retirement Age is a must. I also think it is more important than ever to model different scenarios with a Social Security Calculator. A statement from Acting Commissioner Carolyn Colvin relayed along the following:

“Today, Social Security’s insurance protection has become the foundation of retirement security for almost all American workers and families. The average retirement benefit is modest, about $1,340 a month, yet benefits are the main income for most seniors. For two in three seniors who receive Social Security, it is more than half of their total income.

You may have heard me mention once or twice that retirement is not about assets, it’s all about income! For the two-thirds of Americans, many of them simply began claiming at age 62. Take a look at this chart where I show a hypothetical example where we assume a Full Retirement Age benefit of $24,000 a year, an annual cost-of-living adjustment (COLA) of 3{fddc94492d6c52784c12d4f1e977a44f5436bc9e7de3fc42b9dfd85632c390f1}, and the client living to age 95.

Over the lifetime of the benefit, you can see there is a significant difference in total benefits. Now, there are many people out there that have bad health and may not live past the breakeven point, but for the majority of people, the break event point is significantly lower than life expectancy for a 65-year-old (86 for a 65 year old man, 89 for a 65 year old woman and 93 for a 65 year old couple).

 

Courtesy of Tom Hegna

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