by Paul K. Rudoy, CPA/PFS, Managing Partner
Individuals ages 66 to 70 must act fast to save thousands of dollars.
The Bipartisan Budget Act of 2015 made a major change to a popular Social Security benefit collecting strategy. The two big changes were for Restricted Applications and Voluntary Suspension, sometimes known as File and Suspend.
This strategy allows the higher earning spouse to suspend their Social Security benefits and the lower earning spouse to collect spousal benefits. This can result in the lower earning spouse collecting 50% of the higher earning spouse’s record early and likely increasing benefit collections.
At the same time, the lower earning spouse can let their own Social Security record grow. In most cases, this can be an 8% annual increase in future benefits. In today’s market, that is a very attractive rate of return. The higher earning spouse can then collect down the road, as late as age 70 and the lower earning spouse can switch at age 70 to their own record if it is more than one-half the higher earners record.
I have done calculations for several clients that have shown that this can save between $73,351 and $445,805 in lifetime dollars. When these are present valued, the numbers are still between $22,270 and $183,466. Sounds great, right? Unfortunately, the party is about to end. These strategies are coming to a close on May 1, 2016.
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