SS File and Suspend to End?

[mathjak107]

You keep throwing in the word "completely" which was not originally used. That changes the meaning.

I think that FIRE wanabee's who counted on the SS file and suspend loophole to be more than a small and incidental part of their FIRE plans made an avoidable mistake.

While eliminating the file and suspend loopholes will be mildly annoying for a few, it's unlikely to be any sort of meaningful financial setback for the folks here for the reasons you describe above. And the elimination does seem to level the playing field a bit. We all pay FICA at the same rate. Why should married couples have this type of bonus opportunity when it comes time to collect?

actually divorced couples had the best deal . they could file spousal on each other . married couples only got 1 spousal benefit .

 

[MissMolly]

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.

Can anyone clarify some of this for my situation?

*Spouse is 63 (will turn 64 in Feb) - not yet collecting SS
*I will turn 62 in about 3 more weeks, so will be 62 in the year 2015.
*I had planned to have spouse file for his own when he is 66
*Once I tuned 66 I planned to claim 50% spousal
*I am the higher earner so I planned to delay claiming my own until I am 70

So given that we are both at/over 62 (or will be in another 3 weeks), does this mean my spouse will have to file now for SS in order for me to be able to claim 50% spousal when I turn 66 and continue to delay my own until 70, or does this mean that since we are both over/at 62 years of age in 2015 that we are totally grandfathered into the old rules and we can continue with my previous plan?

 

[mathjak107]

fidelity just cancelled our consultation tomorrow with their new social security tool . with the new changes they are pulling the tool from the branches until things are resolved .

 

[marko]

Seems to me that the most interesting (frightening?) part of this discussion is not that it is happening but how quickly (quietly?) it took to pass.

A recurring theme on this forum is that there's always plenty of time to adjust and, at worst, be grandfathered into to some situation or another.

From what I can tell, nobody saw this coming and, it's too late to do much about it.

No?

 

[MildlyEccentric]

Can anyone clarify some of this for my situation?

*Spouse is 63 (will turn 64 in Feb) - not yet collecting SS
*I will turn 62 in about 3 more weeks, so will be 62 in the year 2015.
*I had planned to have spouse file for his own when he is 66
*Once I tuned 66 I planned to claim 50% spousal
*I am the higher earner so I planned to delay claiming my own until I am 70

So given that we are both at/over 62 (or will be in another 3 weeks), does this mean my spouse will have to file now for SS in order for me to be able to claim 50% spousal when I turn 66 and continue to delay my own until 70, or does this mean that since we are both over/at 62 years of age in 2015 that we are totally grandfathered into the old rules and we can continue with my previous plan?

Based on what I've read about the proposed changes, your original plan seems fine. Your plan involves filing a restricted application, but not filing and suspending. Since you are at/over 62, you will likely retain the option of filing a restricted application. You might have had a problem if your spouse planned on suspending benefits after filing at 66 as that option is going away under the proposed legislation.

 

[Big_Hitter]

Seems to me that the most interesting (frightening?) part of this discussion is not that it is happening but how quickly (quietly?) it took to pass.

The future is uncertain.

Wait until they have to make some real changes to SS. My cohort will get a huge haircut I'm sure.

 

[Independent]

Seems to me that the most interesting (frightening?) part of this discussion is not that it is happening but how quickly (quietly?) it took to pass.

A recurring theme on this forum is that there's always plenty of time to adjust and, at worst, be grandfathered into to some situation or another.

From what I can tell, nobody saw this coming and, it's too late to do much about it.

No?

I'm pretty sure we had a thread about Obama budget proposals in the last year or two that had a number of retirement related issues. This was one of them.

However, I looked at it and said "Maybe part of some big SS overhaul, not going to happen as a stand-alone budget proposal". So, I was wrong on that.

The original wording in this bill would have impacted people who are already collecting. I don't know whether that was a drafting mistake or a political mistake, but they seem to have reversed it within a day.

It didn't grandfather in many pre-62 people - applies to people who are already 61. But, I expect they thought this is a pretty obscure thing, probably mostly used by higher income people who had good advice or the time to analyze this.

 

[Big_Hitter]

But, I expect they thought this is a pretty obscure thing, probably mostly used by higher income people who had good advice or the time to analyze this.

Agreed - generally only higher income people would have the wherewithal to game the system correctly.

FAs are probably happy - they will get more customers paying retail trying to decide whether to draw down 3, 3.5 or 4%...

 

[meierlde]

It should be noted that the end of file and suspend was proposed in the Presidents budget: Here is a link to an article about the proposal in the 2015 budget from 2014:
http://www.fa-mag.com/news/-file-and-suspend---a-social-security-strategy-under-fire-17384.html So it has been in the presidents budget for a while. It is just surprising that it took 2 years to get thru. Note also that because of the increase in Full Retirement age starting with folks born in 1955 the strategy would work less every year as the period between full retirment age and 70 decreases to only 3 years in 10 years, so the benefit for folks born in 1960 would only be 24% at most.

 

[Running_Man]

I'm probably in the minority here, but here goes.

Forum members here comprise a group of uncommonly intelligent and forward looking individuals planning their retirement, and in my minority opinion none would rely completely on SS of any kind, or on Uncle Joe's coin collection, or on the Tooth Fairy, to fund their retirement.

For my wife and I at age 70 SS projections indicate over $50,000 per year in income, what is the amount of this Tooth Fairy fund that I should reasonably be able to count on? This is not a minor amount of money and worth about 1.3 million dollars in retirement savings at age 70 in today's dollars, how much should I have reserved in my own savings to offset?

To place Social Security in the same category as the Tooth Fairy or Uncle Joe's coin collection as investment advice at age 59 implies to me I should either cut my spending plans early in my retirement or else go back to work and earn another 1.3 million by age 70.

An alternative plan would be to just count on the 30K we could have at age 62 and therefore the 320K I was planning to use as bridge spending to get me to age 70 will now be available as 12.8K of withdrawals and use $42,800 as my new income from the "Social Security Funding" portion of my retirement plan, forgoing 7.2K per year or else go back to work until my retirement portfolio grows by another 180K.

Somehow in my investment plans, I must come to grips with the 320K I have for bridging to SS age 70 and how much I can even count on SS with that number being somewhere between 320K and 1 million dollars.

 

[braumeister]

from the SSA website: https://www.ssa.gov/planners/maxtax.html

How much anguish could be avoided if there were no upper limit on SS taxes? Many times in my career I have made more than the upper limit, as have my colleagues and our managers. Personally, I would have been/will be happy to pay SS/Medicare taxes on every dollar I made or might make in the future. At the higher income levels, I can well afford it. It is such a simple thing that would have great general benefit as distinct from actions intended to reduce benefits. Has this issue been covered before somewhere? I am baffled. Thanks.

Same here. This has always mystified me completely. Even though there were only a few years when I was over the upper limit (back in the early 70s), I always felt it was strange that there even was an upper limit. It certainly wouldn't have bothered me to pay a little more.

 

[NW-Bound]

There has been an upper cap in contribution, because there has been a corresponding limit in benefits. This makes the tax feel more equitable, although the benefit is already severely reduced at the high end.

When SS was first enacted, perhaps it was promoted to be just a safety net or supplemental income, hence a cap in benefits and also in the tax. I surmise that SS might be difficult to be passed into law otherwise.

SS was not meant to be the sole source of income for retirees. How did old people manage prior to SS? But as the years go by, more and more people rely on SS for sole income, claim disability, have children late (dependent benefits), get divorced (spousal benefits), and live longer, and here we are.

 

[Theseus]

F&S never seemed to be a strategy that would have been of much benefit for us, so I'm probably a less than neutral about it. I think the writing was on the wall for this to happen, and what gives me the jitters is once this one is is done, what is the next "loophole" target? Yes, we've all heard the grim statistics for decades on how SS, Medicare, etc. will go broke if "something" isn't done.

If anything, this has me reconsidering the strategy of even delaying SS until FRA. The phrase "A bird in the hand is worth two in the bush" has been around much longer than we have, perhaps it is not so unsound advice.

 

[Accidental Retiree]

F&S never seemed to be a strategy that would have been of much benefit for us, so I'm probably a less than neutral about it. I think the writing was on the wall for this to happen, and what gives me the jitters is once this one is is done, what is the next "loophole" target? Yes, we've all heard the grim statistics for decades on how SS, Medicare, etc. will go broke if "something" isn't done.



If anything, this has me reconsidering the strategy of even delaying SS until FRA. The phrase "A bird in the hand is worth two in the bush" has been around much longer than we have, perhaps it is not so unsound advice.

/\ /\ /\ This.

 

[Another Reader]

Didn't give us much time to go into our garages and dig out our torches and pitchforks, did they? No one seems to have anticipated this - Fldelity calling people to cancel meetings means they were not in the know. They spent a lot of money on their new Social Security planner, which is now worthless.

Since all those unemployed folks were shifted to disability to bring down the unemployment rate, someone had to pay. Used to be old folks were exempt from attacks, because they voted. Congress must be counting on another constituency.

Not that it will matter much in my case, but I turn 62 at the end of December. I already filed and the award letter is in hand. Try taking THAT away, Congress....

 

[pb4uski]

Probably will not be a big deal for us. I figure about $20k total ... the difference between 50% of my benefit and DW's benefit based on her work record for a little less than 4 years.

 

[rodi]

Gah ...this caught me by surprise ...hadn't even thought about my circumstances.

I'm 61 now, as is spouse ...I have full earnings history and she has very limited. I turn 62 3 Mar 2016 ...she turns 62 27 May 2016 ...

First Question ....are we the usual sort of couple that benefits from F and S?

Second Question ...if so, will we make it under the wire?

Gah!


Sent from my iPad using Early Retirement Forum

First question: If her earnings history is very limited she probably would be taking spousal benefit (larger) rather than her own earnings record anyway... so this does not effect you.

Second Question: no, you do not make it under the wire. There isn't a final version of the bill (needs to pass the Senate and go through reconciliation) - but the draft I read stated specifically 2015 as the magic "last year" to turn 62 and avoid the new rules. I will admit - I didn't see if this changed in the version of the bill that passed the house... figuring why not wait till the final bill passes.

 

[meierlde]

For my wife and I at age 70 SS projections indicate over $50,000 per year in income, what is the amount of this Tooth Fairy fund that I should reasonably be able to count on? This is not a minor amount of money and worth about 1.3 million dollars in retirement savings at age 70 in today's dollars, how much should I have reserved in my own savings to offset?

To place Social Security in the same category as the Tooth Fairy or Uncle Joe's coin collection as investment advice at age 59 implies to me I should either cut my spending plans early in my retirement or else go back to work and earn another 1.3 million by age 70.

An alternative plan would be to just count on the 30K we could have at age 62 and therefore the 320K I was planning to use as bridge spending to get me to age 70 will now be available as 12.8K of withdrawals and use $42,800 as my new income from the "Social Security Funding" portion of my retirement plan, forgoing 7.2K per year or else go back to work until my retirement portfolio grows by another 180K.

Somehow in my investment plans, I must come to grips with the 320K I have for bridging to SS age 70 and how much I can even count on SS with that number being somewhere between 320K and 1 million dollars.

Assuming that the low earning partner has a career average pay of over 35,170 or so the spousal benefit will now be lower than the individuals benefit.
Also not that the strategy would have paid off less well with folks born in 1955 and later as full retirement age starts going back up, leaving fewer years for the boost to apply.

 

[AtlasShrugged]

from the SSA website: https://www.ssa.gov/planners/maxtax.html

How much anguish could be avoided if there were no upper limit on SS taxes? Many times in my career I have made more than the upper limit, as have my colleagues and our managers. Personally, I would have been/will be happy to pay SS/Medicare taxes on every dollar I made or might make in the future. At the higher income levels, I can well afford it. It is such a simple thing that would have great general benefit as distinct from actions intended to reduce benefits. Has this issue been covered before somewhere? I am baffled. Thanks.

The logic of penalizing success and rewarding bad behavior has always escaped me. That is truly baffling.

 

[NW-Bound]

The logic of penalizing success and rewarding bad behavior has always escaped me. That is truly baffling.

Most people do not want to work too hard unless they really have to. One needs to distinguish between helping the less fortunate and encouraging people to take the easy way out. I submit to you that people who have raised children successfully know a thing or two about how to do this.

 

[pb4uski]

from the SSA website: https://www.ssa.gov/planners/maxtax.html

How much anguish could be avoided if there were no upper limit on SS taxes? Many times in my career I have made more than the upper limit, as have my colleagues and our managers. Personally, I would have been/will be happy to pay SS/Medicare taxes on every dollar I made or might make in the future. At the higher income levels, I can well afford it. It is such a simple thing that would have great general benefit as distinct from actions intended to reduce benefits. Has this issue been covered before somewhere? I am baffled. Thanks.

+1 IIRC taking away the limit goes a long way toward solving the problem especially if they don't increase benefits to reflect the increase in tax. When i was working I exceeded the limit and if my SS taxes had continued it would not have bothered me.

 

[NW-Bound]

+1 IIRC taking away the limit goes a long way toward solving the problem especially if they don't increase benefits to reflect the increase in tax...

The above is a stipulation that will be difficult to keep. We can observe how many pension funds run into trouble. How many state governments can run a surplus without thinking of a way to spend it?

 

[gerntz]

from the SSA website: https://www.ssa.gov/planners/maxtax.html

How much anguish could be avoided if there were no upper limit on SS taxes? Many times in my career I have made more than the upper limit, as have my colleagues and our managers. Personally, I would have been/will be happy to pay SS/Medicare taxes on every dollar I made or might make in the future. At the higher income levels, I can well afford it. It is such a simple thing that would have great general benefit as distinct from actions intended to reduce benefits. Has this issue been covered before somewhere? I am baffled. Thanks.

I take it that if you think a 12.4% increase on taxes for those making over the current max wages income limit is a good thing - to avoid anguish, that you think a tax increase on all income is a good thing too - to avoid even more anguish of course. I mean, why just increase income tax on wages? Most rich make way more on non-wage income than on wages. So why not go after that income to? Seems way fairer to me. Net, you appear to have no qualms on government taking whatever whenever.

BTW, SS was initially conceived as a forced pension plan, not as a welfare system - as I think your proposal makes it.

 

[gerntz]

+1 IIRC taking away the limit goes a long way toward solving the problem especially if they don't increase benefits to reflect the increase in tax. When i was working I exceeded the limit and if my SS taxes had continued it would not have bothered me.

I flat don't get this bias to taxing folks earning wages more and letting those with higher non-wage income skate on this.

 

[pb4uski]

The above is a stipulation that will be difficult to keep. We can observe how many pension funds run into trouble. ...

I don't understand your point.