Laurence Kotlikoff - Maximize my SS.com

[DEC-1982]

Worse yet, from a fairness standpoint, is that the file-and-suspend gaming of the system is done -- and can only be done -- by people who are very well off. The people with average & below average wealth cannot do it.

So the system is:
a) gamed
b) by "the rich"
c) and cannot be gamed by the non-rich.

Seriously unfair.

I saw the phrase "double dipping" in one of the relevant news articles. Whether that is technically correct or not, these loopholes did seem unfair to the "average" guy.

 

[Independent]

Just looking from more dialogue on this subject. Very very few take SS at 70 and not anyone I know takes it at their FRA. I am referring to people that are financially sound and are well informed about SS. Why wait. Don't get it. The money's there, take it.

There are many threads on "when to start SS". I think the majority who post here say that at least one spouse will defer.
First, start earlier if you think you're in poorer health, later if you expect to outlive most of your peers.

Second, figure out your goals. Maximize the expected value of your estate (because you can't possibly spend down to zero while you're alive)?
Or, minimize the chances that one of you will have to cut back significantly late in life?
Or, Maximize your early, "prudent" spending?

The first says start SS early, put the "saved" money into equities for long term growth.
The second says start late so you maximize your annual SS benefit in the unlikely but possible scenario of poor investment returns coupled with a long life.
For the third, if you're a 4% SWR person, surprisingly you can spend more early by deferring.

The survivor benefit is still in place. If both of you will collect on your own record while you're both alive, but one of you has a noticeably higher benefit, and especially if that person has the shorter life expectancy, than starting the lower one early and the higher one late may be optimal.

There are many complicating factors like political risk vs. market risk.

 

[Fedup]

I'm glad they close the loophole, I would have qualified for extra income for 3-4 years but it's not a big deal. I could take my SS at FRA too, I feel bad for those who are counting on this money.


Sent from my iPad using Early Retirement Forum

 

[pb4uski]

+1

 

[Sunset]

Are they going to stop the folks currently doing this or let them carry on for 3 more years, while anybody soon collecting will be prevented from doing so. ?

 

[braumeister]

According to Kitces, it looks as if those already doing this maneuver are grandfathered.

https://www.kitces.com/blog/congres...untary-suspension-social-security-strategies/

 

[gerntz]

A "correction" would mean fixing an unintended consequence. I think the bill does exactly what it intends it to. You can hope they won't pass the bill at all or back it out, but as I understand it they are fixing something they never really intended people to get in the first place.

Congress changes previously passed laws all the time & that's OK. But for members of today's Congress & Obama to think they know what the Congress of 2000 & Clinton intended is a huge stretch imo. Net for me, this is just a change, not a fixing/correction.

 

[gerntz]

The way I see it, they have (rightly so) streamlined the filing process so we are each allowed to file ONCE. Folks have been manipulating the system in order to file TWICE -- first to file and suspend or file restricted application for the spousal benefit, then later file all over again to get their increased benefit at a later age.
So now we will be compelled to CHOOSE when it is we really truly mean it to begin SS benefits and file ONCE and for all. Makes good sense to me from an administrative standpoint, so SSA doesn't have to handle filers twice. Make the call for yourself -- file early and begin spousal benefits, or wait to file later for larger benefits.

Manipulating a system is a good thing. It's being informed & intelligent.

As for not being able to file twice, I think you will still be able to take your own benefit & later switch to spousal benefit when your spousal takes SS. No?

 

[gerntz]

Worse yet, from a fairness standpoint, is that the file-and-suspend gaming of the system is done -- and can only be done -- by people who are very well off. The people with average & below average wealth cannot do it.

So the system is:
a) gamed
b) by "the rich"
c) and cannot be gamed by the non-rich.

Seriously unfair.

To me, if SS was fair, you would get benefits equally proportioned to your contributions. But it's gamed by the Fed Gov to give lower contributors proportionately higher benefits. Net, I suppose it comes down to what your definition of fair is.

 

[fosterscik]

Manipulating a system is a good thing. It's being informed & intelligent.

As for not being able to file twice, I think you will still be able to take your own benefit & later switch to spousal benefit when your spousal takes SS. No?

I believe you are correct. I often find Mike Piper's articles to be clear and concise. This is a typical example which supports your take:
New Social Security Rules: What You Need to Know

Second, deemed filing will now kick in immediately for anybody when they become eligible for either spousal or retirement benefits if they’re already collecting the other type of benefit. (Previously, deemed filing only kicked in when you were actually filing for something.)

That second change is likely a bit confusing, so let’s run through an example.

Example: You file for retirement benefits at age 62, but you are not yet eligible for a spousal benefit because your spouse hasn’t yet filed for his/her own retirement benefit. Then, two years later, your spouse files for his/her retirement benefit. Under the old rules (that still apply to anybody who is 62 or older by 1/1/2016), there would be no deemed filing, because the law only checked for deemed filing on dates when you’re actually filing for something. Under the new rule, in our example when you become eligible for spousal benefits at age 64, you’ll automatically be deemed to have filed for them immediately.

 

[NYEXPAT]

I've been to Machu Picchu twice. I'm takin' SS at 70.

I live nearby, so am taking it at 62.

 

[RunningBum]

Congress changes previously passed laws all the time & that's OK. But for members of today's Congress & Obama to think they know what the Congress of 2000 & Clinton intended is a huge stretch imo. Net for me, this is just a change, not a fixing/correction.

Fair enough. But the first part of my statement holds. The change in this bill is doing what the lawmakers intend. There is no side consequence or unexpected change that needs to be "corrected".

 

[Ian S]

Congress changes previously passed laws all the time & that's OK. But for members of today's Congress & Obama to think they know what the Congress of 2000 & Clinton intended is a huge stretch imo. Net for me, this is just a change, not a fixing/correction.

It would be interesting to hear from those involved in the SS changes enacted in 2000 as to whether or not these provisions were intended to have the effect of giving bonuses to a small subset of folks on SS. I suspect not and that it was more like an enterprising SS financial adviser discovering an unintended consequence that has become so popular as to constitute a measurable drain on SS finances.

 

[travelover]

I live nearby, so am taking it at 62.

Particularly if you have young kids.

 

[gerntz]

Fair enough. But the first part of my statement holds. The change in this bill is doing what the lawmakers intend. There is no side consequence or unexpected change that needs to be "corrected".

So if a future Congress ever changes the benefits/filing rules again they couldn't say they were doing so because the previous rules had unintended consequences? I mean, every rule/law is always fully thought out till its end?

 

[gerntz]

It would be interesting to hear from those involved in the SS changes enacted in 2000 as to whether or not these provisions were intended to have the effect of giving bonuses to a small subset of folks on SS. I suspect not and that it was more like an enterprising SS financial adviser discovering an unintended consequence that has become so popular as to constitute a measurable drain on SS finances.

Again, you resort to calling the previous rules as giving "bonuses" versus recognizing that those using the rule were/are still getting less return for their "investments" in SS than low income contributors. Sorry, but using the word "bonus" comes across to me as bias intended to degrade/shame those using the lawful rule (which I am) to their legal advantage.

And why aren't government regulators/administrators/lawyers with all their time & resources thoroughly vetting the laws being put forth to avoid supposedly, by you, unintended consequences that can be undone by a mere little ole financial advisor? I mean, it seems a silly proposition to me.

 

[rayvt]

Manipulating a system is a good thing. It's being informed & intelligent.

As for not being able to file twice, I think you will still be able to take your own benefit & later switch to spousal benefit when your spousal takes SS. No?

Yes. And no. You get the higher of spousal benefit or your own, you can't get both.

Manipulating the system is good for you but bad for the system.

 

[gerntz]

Are they going to stop the folks currently doing this or let them carry on for 3 more years, while anybody soon collecting will be prevented from doing so. ?

Allowing to continue:

"Congress is putting an end to two Social Security filing strategies that many couples have used to add tens of thousands of dollars to their retirement incomes. But there’s a six-month window in which couples who are at least 66 years old can take advantage of them, as well as a partial reprieve for some others."

"Families who are already using these strategies will be grandfathered. Their benefits will not be changed or interrupted due to the legislation, ...."

New Social Security Rules to End Key Filing Strategies - WSJ

 

[gerntz]

Manipulating the system is good for you but bad for the system.

What does "bad for the system" mean? Not transferring enough wealth to the poorer?

 

[MichaelB]

We are getting off topic here folks ..

 

[Texas Proud]

Again, you resort to calling the previous rules as giving "bonuses" versus recognizing that those using the rule were/are still getting less return for their "investments" in SS than low income contributors. Sorry, but using the word "bonus" comes across to me as bias intended to degrade/shame those using the lawful rule (which I am) to their legal advantage.

And why aren't government regulators/administrators/lawyers with all their time & resources thoroughly vetting the laws being put forth to avoid supposedly, by you, unintended consequences that can be undone by a mere little ole financial advisor? I mean, it seems a silly proposition to me.

I am sure that Ian will give his meaning.... but for me, a 'bonus' (in this sense) is something that someone gets that most do not... or you could even interpret it as getting something that was not intended...

SS is not an investment.... never has, never will be....

 

[RunningBum]

So if a future Congress ever changes the benefits/filing rules again they couldn't say they were doing so because the previous rules had unintended consequences? I mean, every rule/law is always fully thought out till its end?

They can do whatever they want, but I would call that changing a law or backing it out, not fixing an unintended consequence.

I'm trying to think of an example. The best one I come up with is the ACA subsidy cliff. The intent of the law is to provide affordable health insurance by giving subsidies to lower income people. In doing so, they created a situation where $1 of extra income can result in $100s in lost subsidies. Since normally tax cutoffs like tax deduction limits for medical expenses or IRA limits are phased such that you don't have cliffs like this, I would call this an unintended consequence. (It's just an example, so if you want to argue that maybe they really intended for the subsidy cliff to exist, I'm not interested in going there.) If they passed a way to smooth the subsidy so that extra income never costs you more in lost subsidy than you had extra income, that would be a correction to an unintended consequence. The primary goal of the program was to provide a sliding scale subsidy, not to have such a cliff.

Without getting into the whole political discussion, and I'm sorry I couldn't quickly think of a less political example, if they were to rescind the whole program, that's not a "correction", that's backing out or reversing the program.

It's just a terminology thing and not very important. The poster I referenced was hoping for a "correction" in the file and suspend change. Since there seems to be no side consequence arising from the change that needs to be changed to make it really work as designed, there is no "correction" he should hope for, but rather he would have to hope they change their mind and back it out.

Put more simply, if congress passes a law to make A happen, and A happens, but B happens as well, they might try to make a correction to eliminate B so that only the intended A happens, especially if B isn't a good thing. But if they pass a law for A, and only A happens, it's not a "correction" to eliminate A.

I don't know why you seem to be having trouble understanding what I am trying to say, but I'm not going to waste any more time on it. If I'm not explaining it well enough, I don't know how to do it better.

 

[Ian S]

Again, you resort to calling the previous rules as giving "bonuses" versus recognizing that those using the rule were/are still getting less return for their "investments" in SS than low income contributors. Sorry, but using the word "bonus" comes across to me as bias intended to degrade/shame those using the lawful rule (which I am) to their legal advantage.

Not intending to shame anyone with the use of the word "bonus" which I always thought had a positive connotation. The law is the law and you're entitled to take advantage of it.

My understanding of at least one of the advantageous file and suspend strategies required an age gap that was not too great since the file and suspend spouse would have to be FRA and the spouse filing for spousal benefits would have to be age 62 or greater. As I understand it, this strategy would not work for a couple who had say an 8 year gap in ages. I don't understand why the policy would establish that type of distinction. Unless the strategy was an unintended consequence of the law changes enacted in 2000.

IMHO, there is an indentifiable societal good in having lower income folks get a higher benefit in relation to their contributions than higher income folks and I know that the SS law is designed to do that. I just don't see the societal benefit in the file and suspend strategies - at least no benefit that couldn't be more effectively implemented by other means.

 

[timo2]

Here is another stab at explaining what just happened "
The Death of File & Suspend and Restricted Application"

Financial Ducks In A Row • Independent financial advice: IRA, Social Security, income tax, and all things financial

 

[rayvt]

Pretty much all you need to know about why file&suspend was eliminated was seeing all the clickbait ads on web pages that said "Here's a trick for a couple to get an extra $15,000 per year."