President Obama’s proposed budget features a controversial measure that may curb the use of delayed collections, spousal piggybacking and other strategies that retirees often use to maximize their Social Security benefits. The specific language of this proposal reads, “In addition, the budget proposes to eliminate aggressive Social Security-claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits,” according to published reports.
This wording leaves much open to interpretation, however, and advisers and their clients are struggling to determine the effects the proposal may have on their collection strategies. “Because the logic around suspend and delay and restricted application is so complicated and confounded with other rules, it’s unlikely that a simple and quick change can even be implemented,” said Bill Meyer, founder and managing principle of Social Security Solutions. “It seems like it’s directed at the affluent, and that it would require means testing. The big question is who exactly stands to lose.”
Some also consider the proposal untimely given the Obama administration’s stated goal of reducing the deficit in the near term. “The irony is that these aggressive claiming strategies usually involve a delay, so actually less money is taken out of this year’s budget,” Meyer said. While reducing the use of file-and-suspend and other maximization strategies might lead to reduced Social Security costs in a decade or more, disallowing them in the near term would simply contribute more to the deficit in the now.