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October 29, 2015 at 11:01 AM
While retirement planning experts continue to air complaints about the budget deal passed by the House Wednesday, one retirement expert is arguing that the bill’s gutting of the popular file-and-suspend Social Security claiming strategy is “not all bad.” Meanwhile, a pension advocate accused legislators of hiking pension premiums in order to use the defined benefit retirement system as a piggy bank.
The bill could come up for a Senate vote as early as Friday morning.
Planner Michael Kitces and Boston University economics professor Laurence Kotlikoff both slammed the Social Security changes in blog posts on Wednesday, with Kotlikoff calling the changes “devastating.”
But Jamie Hopkins, associate director of the American College’s New York Life Center for Retirement Income, wrote in his Thursday Forbes blog that while the gutting of the file-and-suspend strategy under the budget bill will mean “reduced benefits,” which will “have a negative impact on many people relying upon these Social Security payments,” he sees the changes as also “beneficial to the Social Security system and to the American people.”
Why? Two reasons, Hopkins argues. First, Social Security claiming strategies “had become incredibly complicated with the ‘file and suspend’ system in place,” he writes. “The budget agreement will remove a lot of the claiming strategies by extending the deemed filing rules up to age 70, simplifying the Social Security claiming decision for millions of Americans.”
Second, ending file and suspend is “the first major change to a Social Security system that is in grave need of updating,” Hopkins says.
He cites the most recent Social Security Trustee Report, which warned that Social Security would run out of money by 2033 and only be able to meet roughly 77% of its future obligations at that point.
“While more is still needed to fix the Social Security system, this move shows that the government is not afraid to make the tough decisions necessary to ensure the long-term success of the program,” he said.
