AUSTIN (KXAN) — Big changes coming to Social Security will impact millions of retirees.
As of today one in six Americans receive Social Security benefits right now, almost 59 million people in total.
3.8 million Texans currently draw Social Security checks, with more than 92-thousand coming from Austin alone.
We sat down with Mickey Powell of Powell Financial Partners to discuss what’s changing and how you can be prepared.
What’s the biggest difference people need to be aware of?
One of the most significant changes means retired couples will no longer be able to use a strategy that helps them maximize payments, called “file and suspend.” It allows spouses to coordinate benefits, so they can increase the overall amount of money they receive from Social Security. Under the new rule, if a worker suspends their benefit, ALL benefits will be suspended and this applies to spouses, ex-spouses, and children. This takes effect May 1, 2016. The new budget also phases out restricted application, another strategy to maximize benefits.
Experts say the changes are meant to save the government money and close perceived loopholes in Social Security. But it sounds like it could have a financial impact on retirees?
I was planning to use the “file and suspend” strategy myself, and I did the math on what it will cost my family now that option is going away. So people really need to be educated about this.
What can you do if you are nearing retirement age?
For those who are at least 66 or who will turn 66 by April 30, 2016, there is still an opportunity to get in under the old file-and-suspend system. In other words, if you reach your full retirement age before May 1 you won’t miss out on the opportunity as long as you file in time. If you squeak by under the deadline you will be grandfathered in under the old file and suspend rules.
Many aspects of Social Security are staying the same. Is it still valuable to delay benefits?
Every year you wait to claim after you hit full retirement age, your benefit increases by 8% a year up to age 70–this can mean hundreds more per month, which can add up over a lifetime. That aspect of Social Security is not changing. The widow’s benefit is staying the same as well.
My advice is to make sure you have a plan in place to supplement your Social Security check. That’s why having a trusted financial planner is so important. Workers should be putting aside money in IRAs and 401(k)s to help reach their retirement goals. I suggest finding a local financial advisor who can meet with you face to face, get to know your financial goals, and help you make a plan. We have a lot of great resources for anyone with questions at our website, Powell Financial Partners.com.