Social Security: Changes ARE Coming, Ep #10

There have been numerous changes to the Social Security program since it was created in 1935. Just think: in 1937, life expectancy was age 63—but you had to be 65 to collect Social Security benefits. Two bills have passed since then that have dramatically changed things for the 77 million Baby Boomers that will be retiring. What are they? What impacts did they have? What do I foresee happening with the future of Social Security? Listen to this episode of Retirement Made Easy to learn more!

You will want to hear this episode if you are interested in…

  • [1:38] Social Security: What’s Next?
  • [2:35] The Senior Citizens’ Freedom to Work Act
  • [4:19] The Bipartisan Budget Act of 2015
  • [6:04] Calculate your full retirement age
  • [7:30] When you should claim your benefits
  • [11:20] What changes are going to happen?
  • [14:47] Will my Social Security be taxed?
  • [16:49] Survivor benefits: can you switch to your own?
  • [18:06] Survivor benefits for divorced spouses
  • [19:42] How and when do you claim your benefit?

The TWO acts passed by Congress that were game-changers

The first bill that I’m going to reference is the Senior Citizens’ Freedom to Work Act of 2000. This bill eliminated the retirement earnings test for someone who had reached full retirement age. What does that mean? You can collect your full social security benefit and still work as much as you want.

Your benefits will not be reduced because you’re working. If you’re working and NOT full retirement age but collecting social security, you can earn up to $18,240 per year without a reduction in your benefits. For every $2 you earn over that limit, Social Security will hold back $1 of your benefits.

Before 2015, we used creative strategies to maximize the lifetime social security benefit. When the Bipartisan Budget Act of 2015 was passed, they closed “unintended loopholes” of social security—two of which were the strategies we used to maximize benefits. The biggest change was if you were born after 1953, you could not file a restricted application. What does that mean? The 2015 act cut down on your choices for claiming strategies when it came to social security.

To find out how to calculate your full retirement age—listen to the episode—and reference the resources below!

When you should claim your Social Security benefits

When should you claim your benefits? Everyone’s situations are different. No Social Security benefits are alike. Why? Because the benefits you receive are based on your best 35 working years. Let’s say we have a couple with children. The husband has a higher social security benefit than the wife because she took some years off of work to care for their family. Generally speaking, his benefit is going to be higher.

When I’m advising clients when to claim their Social Security benefits, I make sure they keep in mind the survivor benefit. Whenever there is a death, the higher benefit continues and the lower benefit drops off—that’s the survivor benefit. So if the husband’s benefit is greater, it might make sense to delay the higher of the two benefits when and if possible.

NOTE: Many variables dictate when you should claim social security (age difference, health, plans to work, the dollar amount of differences, spousal benefit, and much, much more).

Social Security: Changes that WILL be coming

Recently, the Social Security Administration completed some research where they determined, by 2035, that the Social Security Trust fund will be bankrupt. Benefits won’t stop, but they’ll all be reduced by 21%—If Congress makes NO changes between now and 2035. But Congress will come up with some solutions to continue benefits for ongoing generations.

The bottom line is that Congress is going to have to increase the amount of money being paid into Social Security. The working generation is already paying 6.2% of their pay into FICA taxes (with the employer contributing the same amount). That is 12.4% of what they make. 77 million baby boomers are going to depend on that money.

In 1935, you had 40 workers paying in for every 1 recipient. In 2020, we have 2.8 workers paying in for every 1 recipient. By 2035, 2 workers will be paying in for every 1 receiving benefits. Major changes to social security will be coming to keep it solvent and running smoothly. These changes are inevitable. So don’t panic and be afraid that your money won’t be there.

Will your Social Security be taxed? How do the survivor benefits work? How do you claim your Social Security benefit? I answer some of my most popular Social Security questions in the rest of the episode—don’t miss it!

 

Resources & People Mentioned

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