By now most retirees or those near retirement have heard that Congress eliminated the ability of American’s to take advantage of two advanced social security filing strategies – File and Suspend and Restricted Application.
As everyone knows the US Budget has been out of control for some time, as of this blog post the national debt is $19.2 trillion dollars. Just to put that in perspective trillion has 12 zeros in it. (You can see the National Debt in real time BY CLICKING HERE)
So when the US ran out of cash again in November 2015 they had to raise the Debt Ceiling by $1.5 Trillion dollars, in order to do that they were forced to eliminate what they called “unintended loopholes” in social security. Eliminating millions of dollars in benefits for claimants.
With todays’ society being mostly “pensionless” we must secure all forms of guaranteed income – social security being the main form of lifetime income.
Social Security may have changed but it is still complicated and as it is the largest source of supplemental income that lasts for our entire lifetimes it is worth doing our homework to truly understand the best strategy for our individual circumstances.
The elimination of these two claiming strategies does not mean that social security is no longer complex nor does it mean that you should just claim at 62; there are still several factors that need to be considered when deciding when to file for social security and each person or family’s situation is unique.
The second aspect of social security that is not talked about enough is taxation of the benefit. Up to 85% of your social security benefit is subject to taxation based on what’s called provisional income. This means that Uncle Sam is going to look at most forms of income in retirement – pension income, IRA distributions (RMDs), half of the social security benefit itself counts toward your provisional income.
So again based on your various sources of income in retirement your social security benefit could be taxed – up to 85% of it. The income threshold for this calculation is very low – only $34,000 for individuals and $44,000 for married couples.
If your income as an individual is more than $25,000 and if your joint income as a married couple is over $32,000 then 50% of your benefit is taxable.
Other things that can reduce the benefits are pension benefits and earned income while collecting social security – there is an earnings test prior to full retirement age.
As again I cannot cover all of the details here – the best way to make an informed decision is to get a comprehensive Social Security Maximization Analysis done. We offer Social Security Maximization reports at no cost to everyone we meet with.
We pay into social security our entire working lives – we should get the most out of it we can.