Social Security used to offer a “do over” to people who erred by starting benefits too early. Instead of being locked into substandard payments for life, those who had the cash could pay back all the benefits they had received and start over with a new, permanently higher payment. Advisors to the wealthy discovered their clients could start payments early, invest the money and pay the principal back at age 70, getting in effect an interest-free loan from the government plus a higher benefit.
As awareness of the tactic spread, Social Security moved to shut it down. Today Social Security recipients can still reset their payments, but they can only do so within 12 months of starting benefits.
A similar fate may await three other retirement “loopholes”–backdoor Roths, stretch IRAs and certain Social Security claiming strategies–that have become increasingly popular as financial advisors learned how to exploit kinks in the law. Read more in my Reuters column this week, Three retirement loopholes likely to close.
Elsewhere on the Web, I wrote two pieces for Bankrate about aging parents: Caring for Elderly Parents When They’re Far Away, based in part on experiences with my dad, and How to Sell Your Late Parent’s Possessions, where I interviewed a woman faced with disposing a massive amount of stuff accumulate by her dad.