After Budget Deal's Surprise Cuts, Can Boomers Really Count On Social Security?

[jpak]

http://www.forbes.com/sites/janetnovack/2015/11/12/after-budget-deals-surprise-cuts-can-boomers-really-count-on-social-security/

The new budget law’s changes to Social Security, which could cost some baby boomer couples tens of thousands of dollars, have elicited strong reactions, including from Forbes readers and contributors.

Much of the anger stems from the fact that the cuts hit those so close to retirement– the ”file and suspend” strategy has been limited for anyone who won’t be 66 by the end of next April and those who aren’t 62 by the end of 2015 will be barred from claiming spousal benefits only at age 66, while they let their own earned benefits grow until 70. (A full explanation of these two changes is here.)

“Every candidate for office promises that whatever changes they make, it will not affect seniors at or near retirement,’’ a reader who goes by the handle maynardGkeynes commented on my blog. “Sorry, anyone over 60 (if not 50) is at or near retirement, and all of them had the rug pulled out from under them at the last minute.”

Critics are also dismayed that the changes—contained in Section 831 of the Bipartisan Budget Act of 2015 with the title “Closure of Unintended Loopholes” –were stuck into the deal without any debate. “Fixing Social Security, which certainly needs plenty of fixing, needs to be done in the light of day, in hearings open to the public,’’ opined Boston University economist Laurence Kotlikoff, a Forbes contributor who co-authored a recent book explaining how couples can exploit the strategies that have just been eliminated.

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Fuck the GOP

yup

[Vincardog]

1. Fuck the DINOs who enable the GOP

[upaloopa]

2. If I get this right a spouse claims spousal benefits

While the other member puts off collecting until they are 70 to increase their monthly payment amount.
To do that you need other income beside the benefits to live on . It seems to me that this is gaming the system. I don't know why I should be upset that it is being disallowed.

[Hoyt]

3. That's the way I feel. I'm all for increasing/strengthening SS, but this is a scheme.

I think this provision was added in 2000. So it has not been a part of the core program.

[karynnj]

11. From some accounts, it was actually an unintended loophole in legislation

designed to insure that people who want to work after full retirement age are not penalized. When we first heard of this, we thought it was unlikely to be legal - as it really does not make sense and seemed to be "cheating". It also is available only for those who can afford to not take both full social security amounts when they can.

We know people who started social security at 62 - due to losing their jobs as they neared 60. They will permanently get less every year they collect. While true that if they die in their 60s or 70s, they will have collected more, this was in many cases an economic decision dictated entirely by their immediate need for income.

One of the two provisions - taking the spousal benefit will disappear for anyone not 62 by the end of this year. You could argue that that provision helps only people already more affluent than average. What that provision allows is that the younger member of the couple could take a spousal benefit equal to half of what the spouse is collecting (while the spouse gets the full amount) starting when the younger spouse turns 66 -- and at 70 revert to their own social security. For couples where both had significant employment income over time, this cuts the cost of waiting to take their own SS until age 70 -- (when they are 66 to 70) by as much as half - because they get the spousal benefit rather than nothing. In return - that spouse's SS will forever be significantly higher. Now consider that that higher SS will be what either spouse will have as the surviving spouse. (Some couples used BOTH provisions and take just one spousal benefit - after both are 66 - by filing and suspending for one after age 66, then the other taking the spousal benefit when he/she becomes 66. Then they both end up with SS defined at age 70. )

The worth of this loophole depends on whether the income from the spousal benefit is needed. If it is not needed, the worth is 4 times the spousal benefit. If it is needed - meaning they can;t wait without it, it is difficult to estimate, but it is greater than the sum of those 4 years of spousal benefits for couples because you need to consider an estimate for all the years where you get the lower social security benefit.

Note, that for the most affluent, removing this has a cost of 4 times the spousal benefit - as they can and will still defer SS if they are in good health. For, the least affluent, all of this will read like most investment advise - something unrelated to their choices. This change likely removes a provision most used by solidly middle class people, who were fortunate enough to hear of it.

[Freddie]

4. Agreed

From what I've read about this, the (fairly few) people that do this are taking advantage of a little known loophole and have other income so they can afford to wait for their benefits. Notice this article is from Forbes magazine. They're probably upset because it will put some "SS advisors" out of work.

[spinbaby]

6. We were planning to take advantage of this

We worry about running out of money in our later years when healthcare costs are higher, so had planned to skew SS to pay more in our later years. I turn 62 next year and am retired, thanks to a corporate layoff; my husband plans to retire in a couple of years, which he can do because Obamacare will take us to Medicare.

[upaloopa]

7. Well in the future people will not be able to do that

I think that is as it should be. Many of us have money problems as we retire and people do what they can to deal with it.

[spinbaby]

10. I won't be able to do that

I turn 62 after the end of the year. What pisses me off is that we've been dutifully scrimping and saving for retirement and are likely to be penalized for it.

[onecaliberal]

5. That's what they get for voting for those fuckers.

[msongs]

8. relax our SS loving president will veto this stuff....right? nt

[SammyWinstonJack]

9. Hahaha....don't hold your breath. He who offers up SS will veto?......LOL