I don’t know where I first heard this expression, it might has been a movie line, or it might have been uttered in response to a very bad business proposal. The full line is, “if you’re going to screw me, the least you could do is take me to dinner and a movie first.” Vulgar, yes, but it’s my reaction to the latest budget congress just passed which impacts my projected social security benefit. I just lost over $63K in future benefits.
Let me take a step back and explain. The Social Security rules are so convoluted that Professor Laurence Kotlikoff has both a book, Get What’s Yours — The Secrets to Maxing Out Your Social Security Benefits, as well as a web site, maximizemysocialsecurity.com to help people navigate this ridiculous minefield. I always knew a bit about the social security strategies, but didn’t give it much thought until recently, as my wife will turn 60 in 2016. Me, I’m 53, and still have some time, but I figured it’s not too early to understand what benefits we can expect. Larry’s book offers strategies for most combinations of people and relationships you can imagine. Divorced couples, older retirees with children under 18, it’s really a myriad of possibilities.
My situation was relatively simple. My wife has nearly 7 years on me, and the strategy that made the most sense was for her to get her maximum benefit at 70, and then when I hit my full retirement age (67), I’d have the ability to apply for just the “spousal benefit.” My wife’s benefit at 70 would be about $3500, therefore I’d have been eligible for $1750/mo while I waited 3 more years to take the benefit based on my own work record. 3 years of this spousal benefit would have totaled $63,000. The new rules, among other things, prohibit this strategy, along with any strategies that included filing and suspending.
This strategy that impacted me was not used very often, it seems. The Times’ story that discussed it was titled “Rarely Used Social Security Loopholes, Worth Thousands of Dollars, Closed.” Perhaps that headline really summed it up. There wasn’t going to be a groundswell of protest for a strategy relatively few people used. On other sites, the comment to this news story contained remarks like, “I’m glad to see this strategy used by the 1%ers done away with. Maybe it will leave more money in the social security trust fund so I’ll actually get my benefit.”
I’m trying to keep an open mind here. On one hand, $63K. On the other hand, a strategy that was probably used only by the well-informed, which may very well skew to the top 10% or even the 1%. The spousal benefit was useful for any couple to use as a way of collecting a benefit while allowing one person’s own benefit to grow 8%/yr for the time between full retirement age and 70. Those who knew about this strategy and planned for it, need to make a bit of a course correction.
Those are the general details. I’m sorry this strategy wasn’t better known and used by more people. We’ll get by ok without this extra money, but I can’t help but wonder what changes are coming next. Will there be any benefit left by the time I’m old enough to collect?
Joe,
Are you sure about the $1750 amount ?
Per SSA at :
https://www.ssa.gov/planners/retire/applying6.html#&a0=0
they say “Note: Your benefits as a spouse do not include any delayed retirement credits your spouse may receive. ”
So if spouse’s age 70 benefit is $3500, age 67 FRA amount might be $2822. So half of that ($1411)x 36 mo. = $50796 in “lost” benefit.
Still puts a hitch in your planning.
Joe, don’t count on anything by the time you are old enough to collect.
Social Security, sadly, is not sustainable. Adjustments have to be done or revenue increased from what? – I don’t know.
Rich Dad says to implement and invest so you don’t need social security or company retirement plans in your golden years. If you do get some benefits paid to you, consider it gravy on your already full plate.
You are one of my favorite writers – you write in simple English so I don’t get confused. Your information is valuable.
How about increasing your income and write a book and sell it to your fans as well as others who would benefit from your knowledge? Pick a subject that you have already written about, i.e. paying down your mortgage and NOT buying into the useless Money Merge Account program. Actually you can write several books based on past articles and posts on different subjects, and sell each one. I would buy them if the price is reasonable (that is another ball of wax to figure out).
I am at the age that I can collect social security but I will wait until I am 67 or 70 and get the max. What I will do with that “gravy” is going to be interesting.
Yes, thanks for the link, $2822 would be her FRA, and my benefit, a maximum $1411. Over $50K still makes me want that movie.
Thanks, Auntie! Always good to hear from you. The book is a thought I’ve had for some time. I appreciate the encouragement.
Ha, my mom’s was “I want to lean in and tell them ‘Kiss me!’ And when they say ‘Huh?’ I’ll tell ’em, ‘Because I like to be kissed when I’m being [fornicated].'”
After missing out on most work in my 20s and a couple of years in my early 30s, I’m just planning on/hoping to keep working as long as possible. I just hope we can get to the point where I can work part time and maybe travel more. Or… whatever. At this point, it doesn’t bear thinking about. We need to get through the $25k oral surgery. Then try to save up — including slowly replacing the single-pane windows — and pay down the mortgage. Then save up for a rental property. We’ll do the best we can, but we’re far behind on the retirement front.
LOL! I can imagine her saying just that! (Note to my readers – I’ve met both Abigail and her mom at Fincon, Donna blogs at Surviving and Thriving. It’s an honor and pleasure to know both of these wonderful people.
Joe: Your comment:” but I can’t help but wonder what changes are coming next. Will there be any benefit left by the time I’m old enough to collect?” is hilarious…Did you ever stop to think that this little known strategy…what some of us would call a LOOPHOLE might have cost you even more had it not been closed? You seem to imply that because of good management the gubmint is going to somehow deny you your just pension…Seems like a little bit of an entitlement attitude on your part…
Robert, I see your point. My article was a bit of hyperbole, a reaction to a reduction in my family benefit that I’d been calculating. The most important part of your comment, in my opinion, is that what I took for granted was actually considered a loophole. And the truth is that it wasn’t a loophole for the rich, but for the well-informed. In the end, I’m a proponent of simplification, often quoting Henry David Thoreau’s urging “Simplify, simplify” as something our congress should do for our tax code. This leaves my remarks on my own loss of a bit of my social security benefit disingenuous.
Thank you for visiting, and commenting.
If it had been better known and used by more people, Congress would have done away with it much sooner.