Even people decades away from retirement should pay close attention to how Congress just ended two lucrative ways of taking Social Security benefits, known jointly as the “claim now, claim more later” strategy.
One big lesson: Once claiming methods are seen as benefiting the affluent, they are labeled loopholes, and that puts them on the chopping block.
“They can go away, and they can go away fast,” says Michael Kitces, a partner and director of research for Pinnacle Advisor Group in Columbia, Maryland.
In my latest for Reuters, how claiming methods turn into loopholes, leaving them vulnerable to cuts.
In my latest for Money, a look at when it’s better to put away the laptop and purchase something at a brick and mortar store instead.
Dear Liz,
Thanks so much for all you do to educate people about their finances. I am a Registered Investment Advisor, and I help my clients make good SS decisions. It bothers me that file and suspend/filing for a restricted benefit has been labeled a loophole, and this characterization may have aided its elimination. My aternative point of view is tha each person who earns a Social Security benefit actually earns and pays for one and a half benefits — one for the worker and the other for a spouse with no or low earnings. I expect that in the early days of Social Security a majority of workers may have received his/her own benefit plus the spousal benefit. Today dual-earning couples both earn a spousal benefit which will probably go unused. The strategy being eliminated allowed one of them to collect this earned benefit for a few years. That does not seem like a loophole/scam to me.
Thanks for your thoughtful comments, Suzanne. Viewed from the other side, people who get only a spousal benefit but who worked at jobs that paid into Social Security might view the taxes they paid as wasted. (Except technically, they are receiving two benefits–any they earned on their own, plus a partial spousal benefit to bring them up to where they would be with just a spousal benefit alone. The net effect is the same: they would have gotten the same amount whether they paid in or not.) Social Security is rife with these inequities but I’m not sure there’s a way to design a perfectly equitable solution.