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Retirement Planning: Are You Flexible With Change?

Social Security Changes Influence Retirement Planning


Current pending legislation is offering investors some curve balls in regard to Social Security reform. Congress has rapidly passed a measure that would put to a stop a claiming strategy that has been quite popular with financial advisors – file-and-suspend. Retirement planning for many families will likely be affected.

The strategy has been popular because it gives some retirees larger lifetime benefits. Financial consultants now have to readjust and figure out how to make up the shortfall. The measure to close these “loopholes,” as Congress calls them, is an effort to offset the increases to the federal spending caps.

The following is a description of the file-and-suspend strategy that is being eliminated:

File-and-suspend: The claimant can file for benefits at full retirement age (66), but puts off receiving them until age 70. The benefit is that it grows by 8 percent annually until age 70. In the meantime, the spouse can claim benefits equal to one half of the claimant’s benefit at age 66. It’s estimated that this strategy costs the Social Security Administration billions of dollars every year.

On the table for discussion for investors who were counting on this strategy in their retirement planning includes everything from cutting expenses to changing how they plan for retirement. Some workers are planning on extending their careers out a few more years than they had originally planned.

Among the hardest hit by the reform will be investors who have not put away enough for retirement and were depending on those Social Security benefits at the rate at which they had planned to receive them.

With President Barack Obama planning to the sign the measure soon, it will go into effect within six months of the signing. This means that once in effect, anyone turning 62 in 2016 or later will not be able to utilize the strategies. In its original draft, the measure would have affected people currently taking benefits under the aforementioned strategies. However, a revision grandfathered those benefits back in.

Here are some points to consider about the new measure:

·         Approximate date for the change is May 1, 2016.

·         The claim is that the strategy only affects the wealthy, but investment advisors say it affects a high percentage of their clients.

·         Individuals already collecting benefits on their spouse’s earnings record will continue to collect those benefits.

·         Those who are under the age of 62 by December 31 of this year cannot collect spousal benefits until they reach full retirement age.

Social Security benefits are certainly part of retirement planning, but there are a number of other aspects of retirement that must be considered carefully. Contact Family Investment Center today and find out how your future can be changed when you’ve got a guide to help you understand all your options. 


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