Nola Kulig
Kulig Financial Advisors
Longmeadow, MA, 01116 USA
413-565-2839
Add to Contacts

Budget Deal Kills File and Suspend Social Security Strategies

December 29th, 2015

At this time of year, I usually like to write to everyone about charitable giving and thankfulness for the blessings that have come our way in 2015. However, if you haven’t already heard, I need to communicate the impact of a recent Congressional budget deal on Social Security claiming strategies. I’ll briefly discuss giving, but only after you know why you may need to revisit your claiming strategy.

This month’s newsletter looks at the following topics:

  • Congressional Budget Deal’s Changes to Social Security Claiming Rules
    • Summary of Changes
    • Who is Impacted
    • What to do if this Impacts You

Congressional Budget Deal’s Changes to Social Security Claiming Rules

Summary of Changes

My initial reaction to the budget deal was “hooray!” since it meant we did not have to go over the fiscal cliff again.  But that was before I understood that in the deal were some of the biggest changes to Social Security claiming we have seen in many years.

Please go to http://www.investmentnews.com/article/20151028/FREE/151029902/budget-deal-would-nix-popular-social-security-claiming-strategies for a summary. In essence, the “file and suspend” claiming strategy for couples is going away, and it will go away quickly, if the deadlines in the bill are realistic. (The article in the link does express some skepticism at the speed with which this change can be implemented, since the wheels of government machinery turn slowly, but anything is possible.)

What this means is that there will be fewer options for taking Social Security benefits for couples. While this simplifies planning, it may also mean less money in your pocket. It certainly means that if you are a pre-retiree, if you used a file and suspend strategy, you should run the numbers again in your retirement plan to see what makes the most sense for you under the new rules.

Even though file-and-suspend may be going away, deferral of benefits still means a significant increase in benefits. But if the file-and-suspend strategy made a difference in the success of your plan, you may find you need to save more now that the approach is no longer available.

Who is Impacted

Obviously couples are impacted by these recent changes. But based on some press descriptions, you may think this does not impact you when in fact it does. There is a lot of talk about how this is only an option for “the wealthy” and that it is a loophole that should be closed. I disagree with the rhetoric surrounding this change. I can think of lots of middle class people who will be impacted who probably do not consider themselves “wealthy.” So any couple, regardless of income, should re-run their estimated claiming strategies.

Singles who were planning on using “file and suspend” to increase retroactive benefits if they changed their minds should also revisit those plans. Under the new rules, retroactive benefits no longer apply. Instead, you only receive your benefit effective at the time you decide to start benefits, including delayed credits.

There was a provision for the truly well off as well. The legislation also places a surcharge on high-income recipients of Medicare. This will be costly for wealthier retirees. Please see the article for the new surcharges. These pale in comparison to the elimination of “file and suspend,” however.

What to Do if this Impacts You

If file-and-suspend was part of your retirement plan, and if Social Security was a large part of your retirement plan, please get in touch to update those projections. This is a bigger issue if your retirement is imminent. If you are approaching retirement, but still have several years, you have time to save more, if necessary, to make up for less anticipated Social Security income.

If you are right on the cusp of claiming benefits, there is not much you can do, although there are some exceptions which do not apply to many filers. But at least you can prepare your income expectations and budget accordingly.

In either case, better to know than to use the ostrich strategy (head-in-the sand).

 

 

Supporting the Fiduciary Standard: You Can Help, too!

September 2nd, 2015

Earlier this year, I shared an announcement regarding Sheryl Garrett’s work on the fiduciary standard. You may remember that she testified in Washington, DC and that President Obama quoted her summary on the topic.

Since then, if you did not know, the Department of Labor has proposed a rule that ALL financial advisors providing retirement advice act as a Fiduciary.  Currently, only Registered Investment Advisory firms and their advisors act in this capacity.  Brokers and registered representatives are required to follow a suitability rule.  As long as the investment, insurance product or portfolio is suitable, it can be recommended, regardless of cost or whether it is best for the client.

The reason I became a fee-only advisor was my past pension consulting experience. I was able to see the bargaining power of corporate America with Wall Street, and how poorly individual investors fared by comparison. So I decided to do something personally about it, leading to the current phase in my career.

I have written to Washington in support of the standard, as have many of my Garrett colleagues. But you can help, too, and we need you to.

This is what we are up against:  www.securefamily.org.  These videos are slick and effective in appealing to emotions.  Wall Street has millions to spend on what is basically misinformation. By contrast, fiduciary advisors and their professional organizations have only thousands.

For the real story, I encourage you to read this article:  http://www.latimes.com/business/hiltzik/la-fi-mh-retirement-firms-protecting-their-conflicts-20150814-column.html

I would be grateful for any support you are willing to provide.

How you can help

The deadline for when you can help is roughly mid-September, depending on how quickly the Department of Labor proposal revisions progress. So now is the time for public comments. If you are willing, I ask for your support by either sending an email or a letter expressing your support and experiences of receiving fiduciary advice from me, especially if you received advice in the past from an advisor in another firm.

1. Contact your Senator to speak out in favor of the fiduciary standard rule and Fee-Only planning.

2. You can send an email to e-ORI@dol.govand include RIN 1210-AB32 in the subject line of the email.

3.  A letter can be sent to:

Office of Regulations and Interpretations
Employee Benefits Security Administration
Attn: Conflict of Interest Rule
Room N-5655
U.S. Department of Labor
200 Constitution Ave NW
Washington, DC 20210

4. OR you can tell Washington how you feel using this link: http://www.congressweb.com/saveourretirement/5.

Your comments need not be long, but it is important that if you agree with the fiduciary standard that Washington hear from real people, not just from Wall Street.

Thanks in advance for your help, and for any questions, please get in touch!

 

Investment advisor representative of an investment advisory services offered through Garrett Investment Advisors, LLC, a fee-only SEC registered investment advisor. Tel: (910) FEE-ONLY. Kulig Financial Advisors may offer investment advisory services in the state of Massachusetts and other jurisdictions where exempted.