Table of Contents
- Social Security Changes that Could Cost Your Family Tens or Hundreds of Thousands of Dollars, Unless...
- Your 2015 Year-End Tax Report is Ready
- What Exactly is Organic Gardening?
- Clean Cobb Salad
Social Security Changes that Could Cost Your Family Tens or Hundreds of Thousands of Dollars, Unless...
With virtually no warning, Congress and the President passed the budget eliminating my two favorite Social Security strategies - apply and suspend and claim now, claim more later. These two extremely advantageous strategies can account for additional benefits of tens to hundreds of thousands of dollars over a lifetime for married couples. The good news is that many people are grandfathered in so they can benefit from these two strategies if either they have already taken the appropriate actions or take those actions before April 30, 2016.
The World as We Knew It
Let’s assume the husband and wife were both 66 years old and the husband had the stronger earnings record. Depending on a number of factors, I usually recommended that the husband apply for Social Security but suspend collection (that is, not collect anything) until age 70.
For every year that he waited between 66 and 70, he would get an 8% increase in his monthly benefits. Not only would his monthly benefits increase, survivor benefits would also increase. At his death, the wife would be entitled to the higher of his benefit or her benefit. The fact that he waited until 70 to collect was good for both of them.
So, you may ask, what was the difference between the husband applying and suspending at 66 and doing nothing, just waiting until 70 to collect? By applying for Social Security, even though the husband was suspending collection, the wife became entitled to apply for spousal benefits. She would be able to collect half of what the husband was entitled to collect at age 66. If he did not apply for Social Security at all, she would not have been allowed to take spousal benefits.
For many couples, the income stream from spousal benefits made it possible (or at least more palatable) for the spouse with the stronger earnings record to wait until 70 to collect.
The World Now
Once the new law becomes effective, spousal benefits will still be available, but only if the primary earner is actually collecting benefits. He can suspend and get an 8% increase or he can collect his benefits and his spouse can collect spousal benefits. He cannot suspend and get an 8% increase and have his spouse collect spousal benefits, as he could before the change in the law. Once the new law becomes effective, there will be no reason to apply and suspend. He should just wait until 70 to apply. The change will be effective 180 days from the date the law passed. For people who file and suspend after that date, no spousal benefits will be paid based on the suspended benefit, but if spousal benefits are already being paid based on a suspended benefit, the spousal benefits won’t be cut off.
One area I feel vindicated is that when I was giving the file and suspend advice, many clients said, gee, if they change the law, would it hurt me if I use the file and suspend strategy. While I could never be certain, I told them that if they do change the law, they will probably “grandfather in” people who applied and suspended. From what I can tell, that is exactly what happened thus vindicating my old advice.
The difference in cumulative benefits before and after the Bipartisan Budget Act of 2015 could easily be $15,000/year for four years or a difference to the couple of $60,000.
Another strategy that will be eliminated is called claim now, claim more later. That was a strategy we sometimes recommended when the spouse with the stronger earnings record was the younger of the two spouses. The spouse with the stronger earnings record applied for and collected only spousal benefits from 66 to 70, then began collecting his own benefits at 70. For anyone turning 62 in 2016 or later, a restricted application for spousal benefits only will no longer be allowed.
These new rules also apply to divorced spouses. This COULD really hurt the stay-at-home mom that signed a divorce settlement expecting to receive spousal social security benefits when she reaches full retirement age. Under the new regulations and assuming that they are close in age, if the ex-husband chooses to wait to apply for his own benefits until 70, the ex-wife is really going to suffer because she cannot claim spousal benefits until he is actually collecting his own benefit. This is going to have to become part of divorce settlement negotiations in the future. Either the husband will have to agree to collect benefits at his full retirement age or there should be some sort of a cash adjustment to make up for the lost income to the ex-wife. We expect more clarification on this issue and will update once we know more.
Every year our firm attends a number of continuing education classes and subscribes to a variety of tax-related publications to gather information that will enrich our clients’ lives. In the fall, we comb through these resources and combine them with our best tax strategies to prepare the Year-End Tax Report. As always, we hope you find it valuable and informative.
To read a digital copy of this report, visit: www.paytaxeslater.com/2015yearendtaxplanning.php.
If you would like to receive a hard copy, please contact our office at firstname.lastname@example.org or 412-521-2732 to give us your request.
For those who aren’t familiar with the concept of organic gardening, it might sound a little strange. After all, you’re growing real fruits and vegetables, aren’t you? In this case, the term “organic” refers to not using synthetic products like pesticides or fertilizers.
The purpose of organic gardening is to replenish the ground’s resources as it makes use of them. You might feed depleted soil with composted plants, or plant legumes that increase the nitrogen in an area that was planted with heavy feeder. You want to cooperate with nature and view your garden as a small part of a bigger natural system -- you’re not trying to fight nature or do something that would harm it.
One key tenet of organic gardening is, “Feed the soil and the soil will feed the plants.” But the reason many people resist organic gardening is because they don’t want their plants to fall prey to insects or diseases. Fortunately, there are some organic pesticides you can use -- but use them as a last resort. There may be some insects that cause a little damage, but move on shortly and aren’t worth the harm that pesticides cause. Remember, there are bigger insects and larger animals that feed on those pests: Ladybugs eat aphids, birds eat grubs, and all manner of reptiles and amphibians can help keep the pest population down too, if you just let nature do its job.
Another way to garden cooperatively with nature is by creating diversity in your garden. Not only will that be less of a target for pests, but a variety of plants will attract more beneficial insects as well. Just be sure to select plants that are best suited to your location and climate. For instance, plants that require a lot of sun shouldn’t be planted in the shade, and plants that need a great deal of moisture shouldn’t be planted in the desert.
If you haven’t embraced organic gardening, give it a chance. Mother Nature will thank you!
- 2 cups chopped romaine lettuce
- 1 cup chopped baby kale
- ½ cup cucumber, chopped
- 1 organic, pasture-raised chicken breast, cooked and chopped
- ½ apple, chopped
- ½ large avocado, sliced
- 1 tablespoon olive oil
- Juice from ½ lemon
- 2 teaspoons full-fat coconut milk (optional)
- 1 clove garlic, minced
- Pinch of sea salt
- Pinch of ground black pepper
In a medium bowl, toss together the lettuce, kale, cucumber, chicken, apple, and avocado. Set the mixture aside.
Put the oil, lemon juice, coconut milk, garlic, salt, and pepper in a food processor or in a high-speed blender and mix until the dressing is smooth. Drizzle the salad with the dressing and serve. If you are preparing the salad for leftovers, wait to chop the apple and avocado to maintain freshness, and keep the dressing on the side.
Variation: Use organic herb-roasted chicken tenders for salad in place of chicken breast.
James Lange, CPA
Jim is a nationally-recognized tax, retirement and estate planning CPA with a thriving registered investment advisory practice in Pittsburgh, Pennsylvania. He is the President and Founder of The Roth IRA Institute™ and the bestselling author of Retire Secure! Pay Taxes Later (first and second editions) and The Roth Revolution: Pay Taxes Once and Never Again. He offers well-researched, time-tested recommendations focusing on the unique needs of individuals with appreciable assets in their IRAs and 401(k) plans. His plans include tax-savvy advice, and intricate beneficiary designations for IRAs and other retirement plans. Jim's advice and recommendations have received national attention from syndicated columnist Jane Bryant Quinn, his recommendations frequently appear in The Wall Street Journal, and his articles have been published in Financial Planning, Kiplinger's Retirement Reports and The Tax Adviser (AICPA). Both of Jim’s books have been acclaimed by over 60 industry experts including Charles Schwab, Roger Ibbotson, Natalie Choate, Ed Slott, and Bob Keebler.