Retirement Realities

Expectations vs. Reality

Predicting exactly what your retirement will be like is about as possible as a meteorologist predicting the weather correctly every single time. In fact, few retirees find their financial futures playing out precisely as they assumed. But, understanding some of the more common assumptions about retirement may help you get closer to your goal than most.

Do Retirees Actually “Outlive” Their Money?

Generations ago, as people retired, many did live in dire straits, sometimes “down to their last dime,” which lead to the creation of Social Security. Today, Social Security is still around and a common supplement to one’s retirement strategy. True, health crises can sometimes impoverish retirees, but working with a financial professional may even help you prepare for this hard-to-anticipate cost.

Retiring on 70-80% of Your End Salary May Not Be Feasible

A quick internet search reveals all sorts of sources instructing new retirees should strive to retire on 70-80% of their end salary, but it can be a tough one to achieve.

Most new retirees often want to travel, explore new pursuits, learn some hobbies, and finally get around to those things they had put off when they were too busy with work. So, in the first few years, some may spend roughly as much as they did before retirement.

For many retirees, median household spending increases on the way to a retirement transition. But, with a smart financial strategy, the annual median household spending in retirement tends to decline gradually after age 60 and begins to plateau when people reach their early eighties.1

Practice Makes Perfect, Even in Retirement

On average, households headed by those older than 65 spend 25% less annually than younger households (a difference of more than $15,000). While health care spending increases in retirement, other household costs decline, particularly transportation and housing expenses.2

Retirement May Arrive Earlier Than Expected

Most people retire closer to age 60 than age 70. Believe it or not, the average retirement age in this country is 61. That means you could find yourself claiming Social Security earlier than you planned, if only to avert drawing down your retirement savings too quickly.3

Living the Life You Want

In general, American retirees seem to have it pretty good. A recent survey found that 47% of American retirees feel that the time they put in before retirement allowed them to enjoy the same standard of living they had while working.4

Remain Flexible in Retirement

Your retirement may differ slightly or even greatly from the retirement you have imagined. Fortunately, it may be possible to create a flexible retirement strategy with the help of a financial professional. It’s never too late to start!

 

 

1. JP Morgan, 2019

2.Yahoo Finance, 2018

3. Gallup, 2018

4. Forbes, 2019

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The 10 Most Commonly Googled Tax Questions — Answered

Taxes can be confusing. We’re here to help. To find out what people’s most burning questions about taxes are, MONEY asked Google for a list of its top tax-related queries—and assembled the information you need.

1. When are taxes due?

It’s April 18 this year. Usually, it’s the 15th — you can read why you get an extra three days here. (If you file for an extension, you get until Oct. 16 to file your return, because Oct. 15 is a Sunday. You must still pay what you estimate you owe by April 18, though.)

2. How to file taxes

This IRS page has links to online forms you can print as well as a locator tool where you can find an office if you prefer to pick up forms in person or don’t have access to a printer. You might also find tax forms at your local library or post office.

If you make less than $64,000, the IRS has a page where you can file your taxes electronically at no charge under the Free File program. If you plan to file with a simple form like a 1040A or 1040EZ, some tax preparation companies like TurboTax, H&R Block, Jackson Hewitt and TaxAct have their own platforms you can use to do your taxes online for free.

If you’re not sure which form you should use, the IRS spells out the differences here. Not sure how to file state taxes? This IRS page has links to all of the state governments, including tax departments.

3. When can you file taxes?

The IRS began accepting electronic returns for 2016 on Jan. 23, 2017.
You technically have until 11:59:59 p.m. on April 18 to file your taxes if you’re filing online, according to TurboTax, but waiting until the last second is a bad idea: A pokey computer could cost you big in penalties. If you’re using U.S. mail, you have to have your return and payment postmarked by April 18. Some post offices stay open late for Tax Day; you can find out which ones have extended hours here.

If you (or your accountant) file your taxes electronically, you have the option of paying online using the IRS’s Electronic Funds Withdrawal function (which is free). You can also pay via credit or debit card (which will cost you a convenience fee of a bit under $3 if you use a debit card, or around 2% of the charge if you use a credit card).

4. How to file a tax extension

If you procrastinated and April 18 is looking like a long shot, experts say you should file for an extension. This doesn’t get you out of paying any taxes you owe by the deadline, but it gives you an extra six months to file. An extension will keep you from getting hit with a late-filing penalty of 5% of the unpaid taxes for each month or part of a month you’re late, up to 25%.

That’s in addition to a late-payment penalty of 0.5% of the unpaid taxes for each month or part of a month—plus interest at a rate of the federal short-term interest rate plus 3%.
If you expect a refund, you obviously have an incentive to get your return in as soon as possible to get those dollars in your pocket. If you file for an extension thinking you’ll get a refund and instead find that you owe, you’ll have to tack on the late-payment charges.

Don’t forget about state taxes. A handful of states will automatically give you an extension if you request one through the IRS, while others require a separate request to that state’s tax department. In some cases, the rules are different depending on whether you owe money or are due a refund.

5. How much do you have to make to file taxes?

There are various thresholds, depending on your filing status, age, and the type of income you receive. For instance, if you’re single, under 65 and your income was below $10,350 last year, you generally don’t need to file federal taxes. This IRS tool can help you figure out if you need to file a tax return.

Even if appears you don’t have to file, experts say it’s generally a good idea to fill in the blanks on a return and see what your bottom line would be. About 70% of Americans are expected to qualify for refunds this year, according to the IRS, but many people never file to collect. The average unclaimed refund is nearly $700. Especially for lower-income Americans, a number of credits and deductions could make you eligible for a refund.

6. How long to keep tax records

The IRS says you should hang onto your tax documents for three years; if you get audited, that’s generally the look-back period they’re allowed to cover. However, if they suspect fraud or underpayment of income tax, or if you’ve written off worthless securities, they can request up to seven years’ worth of tax records. Hang onto documents like receipts that justify deductions like business expenses, charitable donations and so on.

7. When is the last day to do taxes?

Yeah, there are clearly a lot of procrastinators out there. As explained above in No. 1, the filing deadline is pushed back a few days from the usual April 15 this year to the 18th. You have until midnight local time—but if you’re going to put it off that long you should consider just filing for an extension.

8. Is Social Security taxed?

It’s possible. Depending on your income, up to 85% of Social Security benefits may be taxable. If you’re a single filer and your combined income—that is, adjusted gross income, nontaxable interest from municipal bonds and half of your Social Security benefits—is more than $25,000, you will have to pay taxes. If you’re married and file jointly, the threshold is $32,000.

9. How long does it take to get taxes back?

The answer this year might be “longer than usual.” To combat tax fraud, the IRS is taking extra time checking filers’ tax information if they claimed either the Earned Income Tax Credit or the Additional Child Tax Credit. Under a new law, the agency is holding back refunds claiming those credits until at least Feb. 15, and people aren’t likely to see those refunds until the end of February at the earliest. On top of that, “New identity theft and refund fraud safeguards put in place by the IRS and the states may mean some tax returns and refunds face additional review,” the agency warns. For everybody else, the IRS says refunds should be issued in its standard window of 21 days from the time it get your return.

10. Why do I owe taxes?

The first income tax in the U.S. was authorized by Congress in 1861 and levied the following year, to help pay for the Civil War, according to the Civil War Trust, but taxes have been around nearly as long as civilization itself. Historians have found tax records that go back to 6,000 B.C. in what is now Iraq, and the ancient Greek, Egyptian and Chinese cultures all had their own versions. In Biblical times, Roman emperor Caesar Augustus established rules around some personal and inheritance taxes that the English later used to create similar taxes centuries later, according to the Handbook on Tax Administration. Ironically, modern-day Italy has the lowest rate of income-tax compliance out of 10 major developed nations, with less than two-thirds of citizens giving the tax man his due.

And although plenty of Americans have argued in court that they shouldn’t have to pay taxes, the IRS has a helpful 71-page paper that methodically debunks these claims, The Truth About Frivolous Tax Arguments, (which might be equally helpful as a cure for tax-season-induced insomnia.)

 

 

Written By: Martha C. White
Source: MONEY

We’re Going Broke Chasing the American Dream

Provided by MarketWatch

The parlous financial state of many Americans is well-known: My MarketWatch colleagues Quentin Fottrell and Catey Hill had good pieces about it recently.

I’ve written that many Americans take Social Security early or don’t invest in stocks because they just don’t have the money.

But it often takes a personal story to bring it all home, and that’s what writer and critic Neal Gabler did in the May issue of the Atlantic, where he revealed that he’s one of the 47% of Americans who couldn’t come up with $400 in an emergency.

With honesty and courage, Gabler describes how he — who according to Wikipedia turns 66 this year — got into such desperate straits after a writing career he modestly calls “passably good,” but is surely far better.

Gabler has written acclaimed biographies of Walt Disney and Walter Winchell (the model for the smarmy gossip columnist played by Burt Lancaster in the classic movie, “Sweet Smell of Success”). “An Empire of Their Own,” about the pioneering producers of Hollywood, is in my opinion one of the best books ever written about the American Jewish experience.

Unfortunately, Gabler was, as he freely admits, “a financial illiterate, or worse — an ignoramus.”

“I don’t ask for or expect any sympathy,” he writes. “I am responsible for my quagmire — no one else.”

His situation is the product of some bad luck and many poor choices. For the details, you should read the article yourself, or better yet buy the magazine on the newsstand (consider it a non-tax-deductible contribution to good journalism). But in brief, here they are:

1. He chose to be a writer, not the most stable profession.

2. He chose to write books, which don’t produce income for years.

3. He chose to live in high-cost New York City.

4. He chose to have two children, whom he sent to private school early on and then to Stanford and Emory for college.

5. His wife quit her job as a film executive to spend more time with the kids when they moved to eastern Long Island.

By making this public, Gabler opens himself up to scrutiny and criticism, and he didn’t respond to my request for an interview. But how many of us can say we haven’t, with the best of intentions, made big financial mistakes?

Gabler touches on what may be one of our biggest problems, yet one that’s almost taboo to mention: Too many of us are chasing the American Dream without having anywhere near the means to pay for it.

“In retrospect, of course, my problem was simple: too little income, too many expenses,” Gabler writes, speaking for many baby boomers and the shrinking professional middle class.

Convinced their lives would be better than their parents’ (who, in the case of early boomers like Gabler, lived through the Depression and World War II) and that their children’s lives would be better than their own, people did whatever it took to maintain at least the appearance of success, if not affluence.

It wasn’t only “keeping up with the Joneses,” as Gabler points out. “People want to feel, need to feel, that they are advancing in the world. It’s what sustains them,” he writes.

Ambition and aiming high are good things. But the American Dream is much more expensive than it used to be. In 2014, I estimated it costs a family of four$130,000 a year to live it, while incomes are stagnating because ofglobalization, technology, trade, immigration, what have you. That’s putting the Dream out of reach of more and more people.

Too many have filled that gap with easy credit card debt, cash-out refinancings and home equity lines of credit (which exceeded $1 trillion from 2002 to 2005 alone), or by emptying their 401(k) accounts. It may have felt good, but it bankrupted their future. What an apt metaphor for a country that’s living way beyond its means!

It’s really, really hard to tell your daughter you can’t afford to send her to Stanford and instead she’ll have to go to Stony Brook (an excellent state university in eastern Long Island, where Gabler now teaches). It’s hard to say “no” to so many things and still think you’re living the Dream.

So maybe we need to redefine the American Dream beyond the purely material goals of the postwar years, when our growth seemed unstoppable. Maybe it should be more about the freedom to succeed or fail on our own terms. It could also encompass pride in achievement, family and friends, community service and leaving a legacy of which we can be proud.

Because we’re chasing a dream that’s becoming more and more unattainable for more and more people, and too many of us, like Neal Gabler, wind up with nothing to show for it.

Written by Howard Gold of MarketWatch 

(Source: MarketWatch)

The Surprising Costs of Downsizing Your Home

© Jamie Grill/Getty Images
© Jamie Grill/Getty Images

When I look at my retirement stash, I have to admit it’s kind of small. When I look at my house, I realize it’s kind of big. And when I consider the two together, I think that maybe I should downsize and use the equity in my house to buy a condo or add to my retirement savings and rent.

Downsizing isn’t for everyone, but it’s one of the few strategies — along with working longer, delaying Social Security or spending less later in retirement — available to near-retirees who find themselves short on retirement savings and don’t have time to catch up, says Steven Sass, of the Center for Retirement Research at Boston College. “The house is a major source of people’s savings. If you don’t want to work longer or give up eating out in retirement, downsizing should be part of the plan.” (Another way to get at home equity is to take out a reverse mortgage)

Do the math. Before you sell your house and move, add up the costs that can chip away at the amount you free up. For starters, fixing up a house to sell often means spending thousands of dollars in repairs and upgrades (new roof, anyone?). Once the house does sell, you’ll pay commissions to real estate agents on both sides of the transaction, usually to the tune of 6% of the home’s value. Packing and transporting enough furniture to outfit a two-bedroom condo will run $1,500 if you move a few miles away and $5,000 or more if you move across the country, according to the calculator at http://www.moving.com. As for the furniture you don’t keep, you could find yourself spending a few thousand dollars to ship the good stuff to your kid across country and paying a hauler to cart away the rest.

Even after the move, you won’t be home-free. Condo association fees run at least several hundred dollars a month, on top of insurance and property taxes, and if the building needs a major improvement, such as a new roof, you’ll get hit by a special assessment to help cover the cost. Renting is more predictable but leaves you vulnerable to annual rent hikes. And whether you rent or buy, you’ll surely want to buy new furnishings that fit the smaller space, says Paul Miller, a certified financial planner in Boca Raton, Fla. “You think you’re freeing up all this money by downsizing, and then you spend thousands to refurbish.”

Other expenses you might not have considered: Instead of the driveway you currently enjoy, you’ll probably have to fork over cash for a parking space. If you can’t squeeze Grandma’s armoire into the second bedroom (or bear to part with it), you’ll pay $100 a month to rent a storage unit. Because you won’t want to stash those old tax records in the second bedroom, you’ll spring for storage space in the building. Moving far away from friends and family? Factor in the expense of traveling back to the old neighborhood a few times a year. As for the next family reunion, that won’t be happening in your two-bedroom condo: Count on covering the cost of renting a beach house.

Of course, moving to a condo or apartment also allows you to cut your utility bills, eliminate yardwork and snow shoveling, and get rid of your mortgage or trade it for a smaller one — and maybe you’ll make your kids chip in for the beach house. Still, be sure to add up the pluses and minuses before you put out the For Sale sign, not after.

“There are a lot of considerations that go into the downsizing decision,” says Miller. “This may be the last move you’re going to make, so you’d better make it a good one.”

Written by Jane Bennett Clark of Kiplinger

(Source: Kiplinger)

How to Retire Well No Matter What Happens in the Market

Steve Vernon, an actuary and a research scholar at the Stanford Center on Longevity, has a surefire solution for bear scares. “Nothing helps sleeping at night more than knowing you have a fixed stream of income that won’t be impacted by what’s going on in the markets,” he says. The key is to maximize your guaranteed sources of income.

Settle on a Social Security strategy

You can start receiving Social Security at age 62, but if you delay until age 70, the payout will be 76% higher. “Even if you are going to tap other assets to live off before age 70, you still come out ahead delaying Social Security,” says David Littell, co-director of the retirement-income program at the American College of Financial Services. What if you don’t have enough income to cover your needs until 70? Couples have an option. The higher wage earner can delay until 70 while the other spouse taps benefits earlier.

Get the basics covered

Take a small piece of your retirement savings and buy yourself guaranteed income. For example, $100,000 in an immediate fixed annuity these days would entitle a 65-year-old male to a lifetime monthly payout of $555, and $535 for a 65-year-old woman. (Women’s longer life expectancy is the reason for the difference.) That’s the equivalent of an annual withdrawal rate in excess of 6%.

Stick with a single-premium immediate annuity. Since payouts are based partly on market interest rates—which are still low—start with a small contract now and buy in intervals over a few years. You can get quotes atImmediateAnnuities.com.

If you’re five to 10 years from when you want the payouts to start, look into a fixed deferred annuity. You pay your premium today and designate when you want the income to begin.

Turn down the lump sum

Many private-sector employers, eager to shed traditional pension obligations, have been offering employees the option of taking lump sums today. Vernon recommends sticking with the pension’s annuity payouts, as you’ll have a hard time safely creating as big a guaranteed stream of income from a lump sum.

Written by Carla Fried of Money

(Source: Time)

Here’s a Milestone You Don’t Reach Until Your Seventies

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Provided by LifeHack

The major milestones of older Americans are not attended with the same sense of wonder that accompanies the major milestones of younger Americans. Sure, registering for Social Security benefits and signing up for Medicare are rites of passage, but they don’t hold a candle to earning your driver’s license, receiving your first kiss, winning your first promotion, or dancing at your wedding.

If you have retirement accounts when you become a septuagenarian, then you’ll encounter a milestone the Internal Revenue Service (IRS) strongly encourages you to remember. Beginning April 1 of the year following the year in which you reach age 70½, you must begin taking required minimum distributions (RMDs) from most of your retirement accounts. Forbes offered this list:

  • Traditional IRAs
  • Rollover IRAs
  • Inherited IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k), 403(b), and 457(b) plan accounts
  • Keogh plans

There currently are no RMDs for Roth IRAs, unless the accounts were inherited.

If you have more than one qualifying retirement account, then a separate RMD must be calculated for each account. If you want to withdraw a portion of each account, you can, but it may prove simpler to take the entire amount due from a single account. Once you start, you must take RMDs by December 31 every year. If you don’t, you’ll owe some hefty penalty taxes.

The IRS offers some instructions for calculating the RMD due. “The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’ “Uniform Lifetime Table.” A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner.”

If you would prefer to have some help figuring out the correct amount when RMDs are due, contact your financial professional.

How $1,000 Invested at Birth Could Change Everything

baby hand holding money
Getty Images

In the presidential debates, we’ve heard more about Donald Trump’s anatomythan what may be the most pressing financial issue directly in front of millions of boomers: Where will they find monthly retirement income that is guaranteed for life?

The retirement industry can talk about almost nothing else, which in hindsight seems a predictable turn. Did we really believe Americans would manage their 401(k) plans well enough to stash away 25 years of post-career financial security? We haven’t come close, and in this sense the 401(k) has been a colossalfailure. Now the first wave of pensionless retirees is about to land, and politicians have almost nothing to say on the subject.

One reason is that there are no quick fixes, which is why it may be time to dust off a long-term solution first floated in the 1990s and still championed by one of its architects, Bob Kerrey, the former democratic senator from Nebraska. He would like every child born in the U.S. to receive $1,000 in a “KidSave” account that would compound over 65 years before being tapped. “For most people it’s not income that matters,” says Kerry, now with investment firm Allen & Co. “It’s wealth accumulation.”

In other words, retirement security is less about what you earn and more about how much and how soon you save. Compound growth over seven decades can do a lot of heavy lifting.

Kerrey reiterated his support for what he calls “wealth accounts” last week during a discussion on the financial impact of longevity, hosted by Bank of America Merrill Lynch at the Museum of American Finance in New York. These wealth accounts would be funded at every child’s birth through a government loan, to be repaid when the child enters the workforce some 25 years later.

The initial $1,000 by itself wouldn’t make a huge difference: at 6% a year over 65 years it would produce just $44,145 in tax-deferred savings. But the existence of a wealth account from birth would encourage more saving, Kerrey believes. These accounts would be strictly off limits for 65 years and in his estimation could be enough to guarantee adequate income that will never run out later in life. If parents or grandparents, say, kicked in $20 a month for 20 years the nest egg would swell to more than $240,000 at the child’s retirement.

KidSave accounts enjoyed bipartisan support years ago but stalled amid efforts to boost other types of savings accounts and shore up Social Security. As previously envisioned, the initial deposit might be $2,000, indexed annually for inflation. That alone might produce $250,000 at age 65, Heritage Foundation found in its assessment of the program nearly two decades ago. Another version of the program called for $1,000 at birth and five annual payments of $500, which could generate a nest egg of nearly $140,000.

Why dust off KidSave accounts now? They are a relatively painless way to address a retirement income shortfall in the, yes, distant future. But as the youngest boomers and then Gen Xers retire with virtually no guaranteed income other than Social Security, the shortfall will only grow. Everything is on the table now as policymakers try to fix the retirement income issue via things like expanded Social Security, guaranteed retirement accounts, 401(k) annuities, better home reverse mortgages, and breaking down legal barriers to working longer.

Kerrey noted that without change every American now under age 40 will receive a 25% cut in Social Security benefits at retirement. We need interim steps. But we also need a long-term plan. The candidates have touched on ways to fix Social Security and cut ballooning student debt. But for now they are far more fixated on Donald Trump’s, er, hands than the retirement income crisis descending on the nation.

Written by Dan Kadlec of Money

(Source: Time)

Fourth Quarter, a Look Back…

ECB Announces Monthly Rate Decision
Photographer: Hannelore Foerster/Bloomberg

The Federal Reserve pulled the trigger. At the December Federal Open Market Committee meeting, the Fed finally acted, tightening monetary policy by raising the funds rate from 0.25 percent to 0.50 percent. It’s important to remember the Fed doesn’t actually set interest rates. It takes actions designed to influence financial behaviors. The Fed has given rates a push, it remains to be seen whether its efforts will bear fruit.

The European Central Bank (ECB) acted, too. Although, its monetary policy moved in a different direction, offering additional stimulus measures to support European economies. Investors were enthusiastic when the ECB announced its intentions; however, markets were underwhelmed when the economic measures delivered were less stimulative than many had expected.

China’s currency gained status. The International Monetary Fund decided to add the Chinese yuan (a.k.a. the renminbi) to its Special Drawing Rights basket, effective October 1, 2016. After the renminbi is added, the U.S. dollar will comprise 42 percent of the basket, the euro will be 31 percent, the renminbi will be 11 percent, the Japanese yen will be 8 percent, and the British pound will also be 8 percent.

Congress tweaked Social Security. The Bipartisan Budget Act of 2015 (BBA) averted a U.S. default and deferred further discussion of U.S. debt and spending levels until after 2016’s presidential and congressional elections. It also did away with two popular social security claiming strategies. The restricted application strategy was discontinued at the end of 2015, and file and suspend strategies will be unavailable after May 1, 2016.

Medicare premiums go up, but not for everyone. The BBA also limited increases in Medicare premiums. About 14 percent of Medicare beneficiaries will pay higher premiums in 2016. The new premium will be $121.80, up from $104.90 in 2015. Original proposals suggested the premium amount increase to $159.30.

4 Taxes to Consider When Picking a Place to Retire

American Advisors Group/Flickr
American Advisors Group/Flickr

No matter where you live in retirement, your federal taxes will be about the same if you take the standard deduction. Not so for state and local taxes.

Start with income tax. Seven states–Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming–have no state income tax whatsoever.

Next, consider taxes on Social Security.Thirteen states tax your retirement benefits to some degree: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.

But just because a state taxes Social Security doesn’t mean it’s a bad place to retire. Overall, Colorado and West Virginia are actually tax-friendly places to live in retirement despite the tax on Social Security.

Then there’s sales tax. Some states exempt food and medicine, while others famously have no sales tax at all. Some states will tax every dime you spend. Most states allow cities and counties to assess sales taxes, too.

Finally, weigh property taxes. Rates vary from state to state and even among cities in the same state. Luckily, many places offer retirees breaks on property taxes. It pays to check.

Taxes are just one aspect of a happy retirement, but they can be a costly one.

Written by The Editors of Kiplinger

(Source: Kiplinger)

It Wasn’t Just About the Budget

geralt/Pixabay
geralt/Pixabay

Last week, the bipartisan budget bill was signed into law, averting a U.S. default and deferring further battle over debt and spending levels until presidential and congressional elections are over, according to U.S. News & World Report.

The new law includes provisions that CBS Money Watch said are likely to strengthen Social Security and Medicare by improving the programs’ finances. Since the provisions also have the potential to reduce benefits for some Americans, they may not prove to be all that popular. Here are two of the changes that affect Social Security benefits:

  • File-and-suspend strategies will be limited in 2016. This change could cost some Americans up to $50,000 in lifetime Social Security benefits, according to PBS News Hour. The strategy entails having a husband or wife file for Social Security benefits at full retirement age and then suspend the benefits immediately. This allows a spouse to claim a spousal benefit, while the husband or wife receives delayed retirement credits.

Effective May 1, 2016, no one will be able to voluntarily file and suspend benefits to make a spousal benefit available to a spouse or to protect the right to file for retroactive benefits.

  • Restricted application strategies will not be an option after 2015. Restricted application also is a Social Security claiming strategy. It allows an applicant to receive spousal benefits while earning delayed retirement credits until age 70. Americans who meet age requirements in 2015 can employ the strategy; younger Americans cannot.

If you are currently employing these strategies, you are probably grandfathered. We’ll know more when the Social Security Administration offers some insight as to how the new rules will be interpreted. That’s expected to happen before the end of the year. In the meantime, if you have questions about how this may affect your retirement plans, please contact your financial advisor.