Guidance

RESOURCES TO HELP SHAPE YOUR FINANCIAL FUTURE

For 80 years, Social Security has been a key part of how Americans ensure their financial security after they retire. As reliable as Social Security has been, it has often gone through major changes, and 2016 will be an unusually active year for the program as important legal revisions take effect.

The biggest change to Social Security for 2016 is the elimination of the “file and suspend” strategy as it exists now. April 29 will be the last effective date investors are allowed to file and suspend. If you are eligible to file and suspend, and do so before April 29, your family members will still be able to claim spousal or children’s benefits based on your work history. However, you must have reached full retirement age to use the file and suspend strategy, and those who will not hit the 66-year-old mark by May will not qualify for the grandfathering provisions of the new law. You can still choose to suspend your benefits, but in doing so your spouse and children will also be forced to suspend any family benefits tied to your work record. Therefore, those who are old enough to consider file and suspend still have timeto implement the strategy, but the clock is ticking.

The second major change to Social Security this year relates to the restricted application or “file as a spouse first” strategy. The new law increases the age at which filing for spousal benefits is automatically deemed to be filing for one’s own retirement benefits from 66 to 70. Under previous law, this strategy involved filing a restricted application at age 66 or later to receive spousal benefits only, leaving your own retirement benefits to collect delayed retirement credits and grow. The law effectively makes restricted applications unavailable, since age 70 is the latest date at which one would wait to claim retirement benefits.

Those who turned 62 by the end of 2015 will still be able to file restricted applications when they reach full retirement age, even if it takes several years before they are actually eligible to do so. Those whose 62nd birthday is after January 1, 2016 will not be eligible to use the file-as-a-spouse-first strategy. For future planning purposes, that line in the sand at the beginning of 2016 will be important in determining and assessing available options.

Finally, there are a number of things that are actually not changing with Social Security for 2016. The most important of which is that monthly benefits will not have a cost-of-living adjustment this year. This is the first time in five years, and only the third time since COLAs were instituted in 1975, that this has been the case. In addition, several threshold amounts will stay the same in 2016. The wage base on which the government collects Social Security taxes will stay at $118,500, and the earned-income limits will stay at $15,720 for those younger than full retirement age all year, and $41,880 for those who hit their full retirement age during 2016.

In light of these developments, many investors will need to rethink their Social Security strategy. To determine what changes you may need to make to maximize Social Security benefits for you and your family, meet with a Wintrust Wealth Management Financial Advisor.