EVEN AFTER THE APRIL 30, 2016 DEADLINE, Social Security marketing remains a very strong prospecting tool! For those who do not meet the criteria making them eligible to utilize these claiming strategies, there are still available strategies to help individuals maximize the amount they are able to collect in benefits over their lifetimes. Below please find a list of strategies and important facts the public still will need to be informed about.
1) Filing for Benefits Prior to Full Retirement Age
Although more than half of American tax payers start collecting benefits as early as age 62, many do so without realizing how much it actually can cost them in benefits. Beginning to collect retirement benefits prior to reaching full retirement age (FRA) will reduce their benefits by 25% from what they would have been once they reached FRA.
2) Delay Benefits
Delaying benefits beyond age 62 or your full retirement age (FRA) continues to provide a valuable strategy for increasing your benefits. In fact, this strategy alone is likely the most beneficial of all strategies dealing with maximizing benefits. If you compare the amount you’d receive at 66 with the amount you would receive at age 70, the increase is 32% – 8% per year for four years.
3) Do-Over Strategy
Another option that is still available is called the “do-over”. This strategy is achieved by filing for Social Security benefits and then changing your mind later, withdrawing the application for benefits. In order to implement this strategy, you must pay back all benefits received to-date, and can only do so within the first 12 months of when you start to receive benefits. One additional caveat is that you are limited to enacting this strategy only once in your lifetime.
4) Working and Collecting Benefits
When you receive Social Security benefits and start collecting Social Security benefits prior to reaching your Full Retirement Age, earning more than certain limits can result in Social Security’s withholding some benefits – potentially even eliminating the current benefits you are receiving. The rules are as follows:
- Under full retirement age
- $1 of benefits withheld for every
$2 in earnings above the limit ($15,720 in 2016)
- $1 of benefits withheld for every
- Year individual reaches FRA (Full Retirement Age):
- $1 of benefits withheld for every $3 in earnings above the limit ($41,880 in 2016) for months prior to attaining FRA.
- No limit on earnings beginning month individual attains FRA.
It is important to note that if your own benefit is being withheld due to your earnings exceeding the above limits prior to your reaching FRA, any other benefits paid on your record (such as spousal or other dependent’s benefits) will also be withheld. Unfortunately those withheld benefits are not credited back to your dependents later – they are gone for good.
5) Suspension of Benefits
Although the Bipartisan Budget Act of 2015 made major changes to utilizing the “suspend” option, it can still be a viable strategy for some individuals. In the past, the words “suspending benefits” were usually associated with the file and suspend claiming strategy. Today, for those not eligible to implement this strategy by the April 30, 2016 deadline, there are still certain instances individuals may find it advantageous to suspend their benefits. For retirees that require added income temporarily, this option could potentially provide an available option to help them meet their needs.
6) Adding Spousal Benefits Later
For a married couple, another option that might be helpful is to time the filings so that one spouse can delay receipt of spousal benefits until later. While most people are not aware of this FRA-related rule, for a couple with similar PIAs and close ages, it may make sense to take one benefit earlier and the other later. This strategy would be utilized to maximize the Survivor Benefit while receiving the most benefits possible early on in the process.
7) Survivor Benefits Rules Have Not Changed
The new provisions contained in the new law do not apply to survivor’s benefits. A surviving spouse will still be able to choose to take survivor’s benefits first and then switch to retirement benefits later if the retirement benefit is larger. Because the rules that govern survivor benefits are very complex and can lead to much confusion, this is an area that as a financial advisor, you are in a good position to help steer these individuals the right direction…saving them from making a decision that could potentially costs them a great deal in benefits they are eligible to receive!
Yes, marketing with Social Security remains a great prospecting tool! As you can see, even though some attractive filing strategies for individuals as well as couples will soon be eliminated, information regarding all Social Security’s current rules and regulations that remain can be very important information individuals need to be aware as they near retirement. Integrating Social Security as part of the comprehensive retirement income planning plan is still an essential piece of the puzzle. Individuals are looking for the answers to all the questions they have regarding the smartest way to file for and collect the Social Security benefits they worked to earn their entire lives—be the one there to provide the answers!
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