ATLANTA, GA - 3/2/2016 (PRESS RELEASE JET) -- Sweeping changes to social security rules taking effect in 2016 will eliminate several filing strategies used by financial professionals to potentially optimize benefits for many people; most notable is the elimination of two of the most lucrative benefits available to married couples. The file and suspend strategy, as well as the restricted application, will no longer be available in the coming year.
For years Americans have been operating under the notion that by the time they are ready to collect Social Security, their benefits will not be sufficient to support their financial needs in retirement. Considering the fact that one of the fears among retirees today is having adequate income to maintain their lifestyle throughout retirement, the importance of Social Security cannot be overlooked.
According to the Social Security Administration, roughly 10,000 Americans reach age 65 each day. Among elderly Social Security beneficiaries, over half of married couples and 74 percent of unmarried persons receive 50 percent or more of their income from Social Security.
Unlike their parents and grandparents before them, baby boomers are stepping into a new era of post-retirement uncertainty, created by a nationwide shift f/rom traditional, employer-sponsored pensions. This shift removes responsibility from the employer and places it upon the shoulders of the individual.
These new dynamics, combined with the increased volatility of the equities markets, make a strong argument for optimizing Social Security to coordinate with an individual’s overall retirement income strategy and help meet his or her unique needs. Financial professionals not only understand the importance of this piece of the retirement income pie, but may also be able to identify potential retirement income gaps Social Security will not cover and provide possible solutions.
Working with a financial professional and a tax advisor to discuss how social security benefits can fit into a complete retirement income strategy can help provide retirees with an increased sense of confidence.
According to Brad Mattix, an investment advisor, insurance professional and managing member of Mattix Wealth Management, there are numerous strategies and various sets of calculations that can be used to determine an individual’s optimal Social Security payout.
“Fewer and fewer retirees can rely on the security of an employer-sponsored pension,” he says. “In the current low interest environment, it has become increasingly more challenging to create strategies to provide the necessary return on investment, without depleting principal. Still, every retiree paid a portion of each paycheck they’ve earned into Social Security, so when it comes time to collect, it is only fair that everyone receives the maximum benefit to which they’re entitled.”
While not affiliated with the U.S. government or any governmental agency, Mattix has spent time understanding the Social Security regulations and how and when individuals can file for benefits. Learning how Social Security benefits work begins with knowing when to file. Age 62 is the earliest an individual is entitled to start collecting benefits. Since benefits grow by about 8 percent each year from age 66 up to 70, postponing benefits may be advantageous. Claiming at age 70 instead of 62 can increase the lifetime monthly benefit payment by 76 percent.
Optimizing Social Security payments often requires strategy and knowledge of the system’s
rules. For instance:
• Divorced couples who meet certain criteria may currently claim full spousal benefits, something married couples are not entitled to.
• Married and widowed individuals have their own eligibility requirements for claiming spousal or “survivor” benefits, timing and strategy are key for maximizing payout.
• Individuals wishing to continue working, yet provide a spousal benefit can file for their own retirement benefit first and then suspend payments to allow their benefits to grow at the rate of eight percent annually from full retirement age until age 70. Time is of the essence, however, as this benefit will be eliminated later in 2016.
While the options favor married couples, there are also options to optimize benefits for widows, widowers, and certain divorced individuals. Many of these options may no longer be available since the new laws have been enacted.
Since certain claiming strategies are to be eliminated in 2016, time is of the essence to determine
how and when retirees elect to receive their benefits.
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