Congress recently passed the Bipartisan Budget Act of 2015. To the surprise of many Social Security experts, the bill eliminated two Social Security benefit claiming strategies that have been used successfully by many retirees. In this report, Social security expert Brian Doherty explains what strategies Congress has eliminated and what strategies now are your best bets for maximizing your benefits.
Doherty explains that the main purpose of the budget bill was to extend the credit limit so that the government would not have to shut down. To the surprise of many people, Congress added in provisions to eliminate or phase out two benefit claiming strategies that many retirees have used. “Very few people had a heads-up that this was going to be part of that bill.”
The two strategies affected were “claim and suspend” and “restricted application.” Doherty notes that the claim and suspend strategy can still be used up to May 1, 2016. Of course, in order to use it, you must qualify. That, says Doherty, means you must have reached full retirement age, presently age 66. The restricted application strategy is available to anyone who is 62 or older by the end of 2015. Doherty points out that individuals don’t have to use the strategy by the end of the year, but only those who qualify can use it in the future. As to how the strategies work, Doherty explains that they are strategies to claim spousal benefits that should be looked at closely because they will be going away.
As to why Congress made the change, two reasons have been put forward. One claim was that only wealthy people were taking advantage of the strategies. The other claim was that the strategies were increasing the cost of the Social Security system. However, says Doherty, when you look below the surface, these claims are not really good reasons for the changes that were made. Doherty points out that these strategies were available to everyone, not just the wealthy. People who didn’t have financial advisers didn’t always find out about these strategies. About 70 to 75% of retirees are totally or critically dependent on Social Security. So the fact is that these strategies would be most beneficial to this large group of people at the lower end of the wealth scale and would permit them to increase their benefits substantially.
Doherty says that the Center for Retirement Research at Boston College analyzed both of these strategies in 2009 and concluded that if everyone who could chose to use these strategies, it would increase the cost of Social Security by less than two percent. That seems like a small price to pay to improve the financial security of millions of retirees, but the change has been made.
In spite of these changes, Doherty says that people should delay claiming their benefits for as long as possible. There is a large body of opinion and research suggesting that people should delay claiming their benefits for as long as possible, ideally until age seventy. As Doherty points out, if you claim at age 62, you “lock into the smallest benefit” you can receive for the rest of your life. “If you wait until age seventy, your benefit will be seventy-six percent bigger.” So among other things, people should consider working longer so as to lock in a larger benefit at retirement. People who have some money saved can think about retiring at age sixty-two but using income from investments to sustain them until age seventy, when they can claim benefits and receive a larger check because they waited.
Brian Doherty is the author of a new book “Getting Paid To Wait,” which reveals his groundbreaking strategy on how to maximize Social Security benefits. He is a nationally-recognized expert on Social Security claiming strategies and a top-rated speaker and media commentator on this topic. He began his career as a financial advisor with Dean Witter. He is President of Filtech, a consulting company specializing in Social Security claiming strategies. The Legal Broadcast Network is a featured network of the Sequence Media Group.