SS File and Suspend to End?

[Boss2014]

I'm probably in the minority here, but here goes. Relying on a government loophole to fund your retirement is a flawed strategy.

+1

 

[2017ish]

I'm probably in the minority here, but here goes. Relying on a government [-]loophole[/-] [program] to fund your retirement [may be] a flawed strategy.

FTFY. This is, all in all, a small change. But, as has been the case since the 80s, we continue not to include social in our planning.... Will accept the icing and give it to our kids if it is there when we are 70.

 

[AtlasShrugged]

FTFY. This is, all in all, a small change. But, as has been the case since the 80s, we continue not to include social in our planning.... Will accept the icing and give it to our kids if it is there when we are 70.

I agree with you that the potential elimination of file and suspend is minor in the grand scheme of things. I also agree with you that relying on social security at all is a risky proposition. However, F&S is a loophole. Congress and the President wouldn't have the guts to go after it if it wasn't.

 

[mathjak107]

only 8% of those taking ss wait until 70 so it isn't going to effect a lot .

 

[fosterscik]

A little more information here:
Are You About to Lose $50,000 in Future Social Security Benefits? - Bloomberg Business

When would the change go into effect?
An original version of the budget deal ended file and suspend in six months for everyone using the strategy. That would have abruptly cut off checks to thousands of retirees, or many more. Today the deal was amended so it affects only retirees who file for benefits in the future, and the change wouldn't go into effect for six months. That means older workers who want to use the strategy could still do so until early next year.

 

[alaska55]

Quote:
Originally Posted by AtlasShrugged View Post
I'm probably in the minority here, but here goes. Relying on a government loophole to fund your retirement is a flawed strategy.

+2

 

[athena53]

I'm probably in the minority here, but here goes. Relying on a government loophole to fund your retirement is a flawed strategy.

I agree with you as well, but I'm still happy that it appears I'll be able to collect Spousal at FRA and then my own at 70, according to an article I just read, since I'm already 62 and DH is already collecting his.

One of the things I had thought might help save SS was the number of women working, and remaining in, the paid workforce. This would be especially true of women who had lower-paying jobs, PT jobs, or a 10-year gap in work while raising children. They contributed to SS but most would have gotten a higher Spousal benefit- in other words, they got nothing more from SS for the payroll taxes they paid. Then there are the ones who had access to greater opportunities and who stayed in the workforce and will have benefits based on their own records, so Spousal won't apply.

If I look at DH and me and our previous spouses, there's only one (possible) person right now collecting on a spouse's record.

1. My Ex died when I was 57 and I was remarried anyway, so couldn't collect on his record.
2. HIS first wife was a brilliant inorganic chemist who would have collected on her own record.
3. DH's first wife might be collecting on his record.
4. DH wasn't married long enough to his second wife for her to collect on his record.
5. Probably no one will collect Spousal on my record- if DH leaves this earth before me, I may find myself a boy toy but doubt I'll remarry. DH's own SS is higher than Spousal would be when I start collecting.

None of the Exes remarried, so no one is collecting Spousal based on their records. So there you have it- 6 people, only one possibly collecting Spousal on another's record, no one other than DH with someone collecting Spousal on their record. If the laws don't change, I'll get 4 years on DH's record.

I guess DH and I and our Exes aren't typical.

 

[DEC-1982]

I'm probably in the minority here, but here goes. Relying on a government loophole to fund your retirement is a flawed strategy.

+3

 

[Slow But Steady]

Originally Posted by AtlasShrugged
I'm probably in the minority here, but here goes. Relying on a government loophole to fund your retirement is a flawed strategy.

It's well known that there's going to be a shortfall. This particular change is not to my liking, but neither is it unexpected.

I imagine there are going to be more changes in the future that I don't like much either.

 

[gerntz]

I'm not sure, but I think I will be affected by this. I am 67 and have been receiving divorced spousal social security benefits for the past year, with the understanding that my own SS is still growing until I am 70 (when I planned to switch over to it).

If my understanding is correct, this bill will mean that I will be immediately shifted over to my own benefits which right now are barely greater than my divorced spousal benefits, but less than my own benefits would be at age 70. Then they would remain at the lower ("age 67", not "age 70")
level for the rest of my life, no matter what I do.

Or worse, that that shift won't even happen unless I do it myself. This is very confusing to me and it sure happened fast.

I think you're OK as you are based on this:

"Under the bill, anyone 62 or older this year will retain the ability to file a restricted application at age 66 or older to receive only a spousal benefit. But they will be able to do this only if their spouse is already claiming a benefit, said Mr. Kitces. For those younger than 62 this year, the restricted-application strategy will no longer be available."

Key in that I think is "WILL retain the ability TO FILE"; i.e., you're older than 62 & have already filed, so it doesn't affect your existing situation (Mine too btw) the way I read it.

Budget Deal Ends Key Social Security Claim Strategies - WSJ

 

[gerntz]

I'm probably in the minority here, but here goes. Relying on a government loophole to fund your retirement is a flawed strategy.

Government over & over changes taxes & benefits. You could call anything a loophole that is subsequently changed. Being able to collect SS at all before FRA could be described a loophole. Spousal benefits could be called a loophole. Taxing some income at 10% & other at 40% could be called a loophole for the 10% stuff. Net, call all benefits or taxes loopholes or call none of them that - imo.

 

[growing_older]

Government over & over changes taxes & benefits. You could call anything a loophole that is subsequently changed. Being able to collect SS at all before FRA could be described a loophole. Spousal benefits could be called a loophole. Taxing some income at 10% & other at 40% could be called a loophole for the 10% stuff. Net, call all benefits or taxes loopholes or call none of them that - imo.

I don't think it is a loophole just because it is complicated. It's a loophole because it had an unintended effect that gave additional benefits to some. The idea of collecting SS before FRA was deliberately written in as a feature. That was the actual point of that provision. Progressive tax brackets are also a deliberate feature.

Now, if you came up with some clever way to reclassify your income so you could take millions in the lowest bracket, that would be a loophole.

 

[Willers]

Government over & over changes taxes & benefits. You could call anything a loophole that is subsequently changed. Being able to collect SS at all before FRA could be described a loophole. Spousal benefits could be called a loophole. Taxing some income at 10% & other at 40% could be called a loophole for the 10% stuff. Net, call all benefits or taxes loopholes or call none of them that - imo.

+1 A loophole to one person is tax policy to another. Every tax deduction fits the definition.

 

[W2R]

I think you're OK as you are based on this:

"Under the bill, anyone 62 or older this year will retain the ability to file a restricted application at age 66 or older to receive only a spousal benefit. But they will be able to do this only if their spouse is already claiming a benefit, said Mr. Kitces. For those younger than 62 this year, the restricted-application strategy will no longer be available."

Key in that I think is "WILL retain the ability TO FILE"; i.e., you're older than 62 & have already filed, so it doesn't affect your existing situation (Mine too btw) the way I read it.

Budget Deal Ends Key Social Security Claim Strategies - WSJ

Good, I hope you are right! I decided last night that there is no point in worrying about it anyway. I'll still have plenty to fund my retirement (since, like so many others here I planned my retirement without including ANY SS at all). But after all the years of paying into the system, it's sure nice to finally get some of that back to supplement my other retirement income, that, as planned, is coming from numerous income streams.

Speaking of that, personally I find the statement about relying on a government loophole to fund one's retirement, to be borderline insulting/demeaning and completely out of whack with anything I have read on this thread.

From years of reading and participating on this forum, I have found it is VERY rare for anyone here to rely completely on SS at all, much less relying completely on the more advanced SS strategies (oh, I forgot, now we must call them "loopholes"). My observation is that about everyone here runs FIRECalc without SS once in a while to see if they can survive without it, just in case.

That doesn't mean that everyone is going to happily surrender all or part of their SS benefits without uttering a single word of protest. Some things are right, and some things are wrong, and most of us know the difference.

 

[Big_Hitter]

I don't think it is a loophole just because it is complicated.

Sec. 831. Closure of unintended loopholes.

 

[gerntz]

I don't think it is a loophole just because it is complicated. It's a loophole because it had an unintended effect that gave additional benefits to some. The idea of collecting SS before FRA was deliberately written in as a feature. That was the actual point of that provision. Progressive tax brackets are also a deliberate feature.

Now, if you came up with some clever way to reclassify your income so you could take millions in the lowest bracket, that would be a loophole.

I didn't say something was a loophole just because it is complicated. Net, you've posed a red herring.

All tax & benefit laws create unintended effects. Of course they usually have mostly intended effects, but there are unintended ones too. People do reclassify income to avoid taxes such as using IRA RMD's to fund charitable giving & not have that RMD to count as income.

 

[MichaelB]

Good, I hope you are right! I decided last night that there is no point in worrying about it anyway. I'll still have plenty to fund my retirement (since, like so many others here I planned my retirement without including ANY SS at all). But after all the years of paying into the system, it's sure nice to finally get some of that back to supplement my other retirement income, that, as planned, is coming from numerous income streams.

Speaking of that, personally I find the statement about relying on a government loophole to fund one's retirement, to be borderline insulting/demeaning and completely out of whack with anything I have read on this thread.

From years of reading and participating on this forum, I have found it is VERY rare for anyone here to rely completely on SS at all, much less relying completely on the more advanced SS strategies (oh, I forgot, now we must call them "loopholes"). My observation is that about everyone here runs FIRECalc without SS once in a while to see if they can survive without it, just in case.

That doesn't mean that everyone is going to happily surrender all or part of their SS benefits without uttering a single word of protest. Some things are right, and some things are wrong, and most of us know the difference.

+1

This change affects us as well. It doesn't sound like there's much we'll be able to do, we still need a law and not a bill, and the rollout and implementation details have to be announced.

I don't know anyone that relies on this as a primary strategy to retire. This is really limited to people that have multiple retirement options.

 

[NW-Bound]

I just learned from the info from this thread that the file-and-suspend provision was enacted only in 2000, and was not there from way back as I had assumed.

Call it a loophole or not, but some lucky people were fortunate to make use of it (I cannot blame them), and earlier and later SS recipients may feel envious. I wish our lawmakers would consider matters more thoroughly before enacting any new law. Of course, that is a pipe dream.

 

[travelover]

I would consider the whole spousal benefit to be a loophole. Being able to collect a larger SS benefit than a low paid worker by virtue of marrying a high earner, even if you never worked a day in your life, is quite an injustice.

 

[Telly]

Government over & over changes taxes & benefits. You could call anything a loophole that is subsequently changed. Being able to collect SS at all before FRA could be described a loophole. Spousal benefits could be called a loophole. Taxing some income at 10% & other at 40% could be called a loophole for the 10% stuff. Net, call all benefits or taxes loopholes or call none of them that - imo.

Very Good! Thank You!

Furthermore, if the SSA, a gigantic tax-supported federal agency is unable to think and predict, in advance, of possible "unintended consequences" of a rule that they are considering making (like file and suspend), then I suggest an immediate 20% across the board RIF for that organization as a future inducement for the need of critical thinking.

 

[Cobra9777]

Oh well, guess I need to subtract $50K from Ye Olde Spreadsheet.

When I first learned about F&S, I remember thinking to myself, "this can't be right... must be an unintended loophole that will be closed soon." The only surprising thing is why it took 15 years. Actually, maybe not so surprising.

I hope I'm wrong, but I think there will be additional unpopular changes before I ever collect a dime. Some combination of: asset-based means testing, additional taxation of benefits, increased retirement ages, reduced COL adjustments, or just plain old-fashioned cuts to promised benefits.

Ye Olde Spreadsheet includes an "SS reduction factor", which is currently set at 0.70. Based on this development, in addition to removing the $50K, I think I'll take that factor down to 0.50. Plan still works fine. I just want to be realistic. And I'm feeling less realistic about SS now.

 

[Running_Man]

only 8% of those taking ss wait until 70 so it isn't going to effect a lot .

In researching this it appears this is saving the government 10 billion a year and most likely as this was becoming more popular was slated to grow to a larger portion. This money is being used to help the disability social security underfunding.

Only recently have people been realizing the tools to get to 70 and how much more they can claim. Eliminating file and suspend will definitely increase those living on SS at FRA and under as there is no other way to bridge the monetary needs for the spouse or kids without claiming. 34 percent of all retirees over 65 are counting on Social Security alone for 90% or more of their income. 74% of all single people receive more than half of their retirement income from social security.

If one assumes 8% waiting to age 70 that could be 10-16% of households waiting to 70. I realize the temptation is to think, they should have saved millions like me but truth is most people do not. They main beneficiaries of those that wait to file to age 70 is for the most part would be elderly widows over age 85 who will now have 32% or less now to live on.

 

[Running_Man]

I would consider the whole spousal benefit to be a loophole. Being able to collect a larger SS benefit than a low paid worker by virtue of marrying a high earner, even if you never worked a day in your life, is quite an injustice.

This is the next thing on the radar, and was frequently paired with file and suspend as an "easy change". I would expect this to pass within the next 10 years. Of course by changing this after their working years have passed doesn't allow for much changing of behavior.

The dropping of file and suspend will cost me $1,000 per year off of my retirement income, not the end of the world but it is a noticeable amount. The dropping of spousal benefits would cut an additional $2,500 from my planned retirement income. What is not being seen is that the net effect of these changes is deflationary in nature as the drop in income results by necessity in a drop in spending, cutting the very growth USA needs to have any hope of getting out of debt issues like Japan has.

 

[athena53]

I doubt they'll eliminate Spousal benefits. Too many elderly (mostly) women would be thrown into poverty, even if it's phased in for future recipients. My wonderful DIL is 30 and a SAHM with a 2-year business degree. They're good savers but I'd hate to see her without Spousal SS.

An example of one change I believe they made to the original model- it used to be that you lost your Widow/Widower's SS if you remarried. Now if you remarry after a certain age you're unaffected. Too many seniors were living in sin! [emoji4]. Sometimes expensive decisions have to be made as a matter of public policy.

 

[Bestwifeever]

So to be unaffected by the loophole closing it sounds like one has to be

*older than 62 by the date the amendment specifies,
*with a spouse already collecting,
*financially able to wait until 66 to claim spousal,
*and for the maximum loophole benefit have a spousal benefit that is more than one's own benefit at 66 but less than one's own benefit will grow to by age 70

This works for me. For my numbers with simple calculations, looks like it will give me a bonus of around $35k over the next 20 years, or an average of $1750 a year. I promise to give it to charity. If this interpretation is wrong, oh well.