The 2015 budget reconciliation act changed a couple of things with Social Security that people are confused on in terms of who qualifies and who doesn’t qualify right now. If you were not 66 by May 1, 2016, you can no longer do file and suspend. What file and suspend was, is you would file for your benefits, immediately suspend receiving them, but by doing that your spouse or dependent children could collect the benefit based on your work record. No longer available for anyone, now they can only collect on your record if you’re collecting a benefit yourself. The other is a restricted application for spousal benefits only. What changed there is that if you were born before Jan. 1, 1954, so all those people born 1953 and earlier, they have a few more years to do this because they’re not 66 yet. They are not full retirement age yet, but those folks born 1953 and earlier can go in when they become full retirement age, which is age 66 for them, and say “I want to file a restricted application for spousal benefits only,” which is one half of what their spouse would be receiving on their spouse’s work record. They can still do that. Anyone born 1954 and later cannot do that either. Anyone born 1954 and later if they go in to file for benefits will get the higher of their own or their spousal benefit at that point in time. They no longer can switch from one to another.
So it is confusing. It’s something with these dates that are all over the place when they do this type of thing, it was hidden within the act, but they definitely are enforcing it. If you go to internal, if you go to Social Security and try to get this for someone who was born 1950 and earlier, you may be told you can’t do that. So ask for a tier two representative. Ask for somebody who knows more about this change in the law because even the Social Security Administration is confused about how this works.
I hear a lot of clients, and practitioners too, saying that “Social Security won’t be around when I get to that age.” Maybe the younger generations say this. I have got some folks who are nearing Social Security that say this: “If I don’t start now, they may take it away before I start.” Social Security will be around. If you look at the facts and circumstances about it, more people are relying on Social Security. Half the population 65 and over lives solely on Social Security. That’s not going to change; it’s just not going to change. We work as CPAs, with the higher earning population. There are many people that aren’t those people and Social Security is important. It’s still important for your client too. People who have the highest income — the top 20% of income — in retirement still rely 20% on Social Security. So if they didn’t have that number, they would have to have another almost another million dollars saved to replace that Social Security. The problem with Social Security too is not a 100% problem it’s either we have it or we don’t have it. It’s a 21% problem.
The prediction is in 2034 that Social Security will only be able pay 79% of the benefits that are promised. So again it is not a 100% problem, it’s a 21% problem, and fixing that 21% problem really wouldn’t be that difficult. We just need Congress and the Senate to act on it. They will, but as we’ve seen over years and years and years, they usually act on it when it’s more of a crisis situation, not when it’s 10 — well, in this case —17 years out from today, so they’re not going to act on it today, don’t expect them to, but they will. And they will fix it and it will be there because it’s been here for over 80 years now. It is in the fabric of our society, and to take that away, how else would we be able to support these people? There’d have to be some other program. You just don’t have this program disappear and have everyone in United States OK with it. So the fear of it not being there — please stop saying to your clients “it won’t be there; let’s not put it in your planning.” Expect them to count on it. Should they count on it as much as they as they would like to? Potentially not. If you use that 79% — take 79% of their expected benefit, use that number, but use some number because they are going to receive something.