Ground Breaking Social Security Reform

Groundbreaking Social Security reform contained in budget legislation approved at breathtaking speed this week by Congress has financial advisers scrambling to rethink many of their clients’ retirement plans.

The measure, passed by the Senate early Friday morning after being approved by the House earlier in the week, includes a provision that ends two popular Social Security claiming strategies: file-and-suspend and filing for a restricted claim of spousal benefits.

Both approaches generate higher benefit payouts for entitlement recipients and have been baked into retirement planning for many aging clients.

“We’re going to have to take all of that, throw it in the trash can, and do the analysis all over again,” said Michael Kalscheur, senior financial consultant at Castle Wealth Advisors. “That’s going to be a huge task for planners to try to figure out how to make up for that shortfall in income.”

Clients will have to tap other financial resources to fill in the retirement-funding gap, said Robyn Hari, principal at Diversified Trust. That may include cutting personal expenses, continuing to work or depending more on their children.

“They may not have much time to make up that difference,” Ms. Hari said. “They’ll have to look at adjusting their standard of living or working longer.”

Clients who have not saved enough for retirement and were depending on the extra boost from Social Security with these particular spousal claiming strategies will be hit the hardest.

“For somebody who was tenuous, this may be the thing that pushes them over the edge,” said Don St. Clair, owner of St. Clair Financial. “They’ll have to delay retirement or live on less.”

Changes to Social Security claiming strategies will take effect within six months of it being enacted. President Barack Obama is expected soon to sign the measure, which sets federal spending limits for the next two years and lifts the ceiling on the federal debt limit.


About Jeffrey Berson

40 years in and around the industry has made Insurance a part of my DNA. I have had the pleasure of working with and for some of the greatest minds in our industry. My "Bersonal" View is an attempt to capture some of the best ideas, the best concepts and the best practices in a way that can lead to success for others. It will certainly be my point of view, so please...don't take it "Bersonal".
This entry was posted in Bersonal Posts. Bookmark the permalink.

1 Response to Ground Breaking Social Security Reform

  1. Roni Roslyn Berson says:

    “file-and-suspend and filing for a restricted claim of spousal benefits” I guess I never used those strategies with my clients because I don’t know what that means? Can you briefly explain?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s