In the last couple of weeks new laws have been passed that make sweeping changes to social security rules that affect how and when a person can take their benefits.  In short, these changes eliminate some of the strategies that couples have previously been able to use to increase the amount they receive during retirement.  Here is who is affected:

If you are not 66 years old by May 1, 2016, you will not be able to use the “file and suspend” strategy. This is a strategy whereby one spouse receives spousal benefits from ages 66-70 while the other spouse suspends his or her benefits until age 70 to receive a higher monthly amount.  If you have turned 66 before that date and you haven’t yet started taking benefits, then you need to act, before April 30th, in order to be grandfathered into the current system.

If you are not 62 by the end of 2015, you will no longer be able to file a “restricted application” for benefits. Most individuals have the option to either take spousal benefits or receive benefits based on their earnings.  If a person takes spousal benefits during their 60s (even if they are a lower than their own benefits), that allows their own benefits to continue to bump up each year, so that the person can then switch to benefits based on their earnings at age 70 at a much higher amount.  The new law eliminates that choice if you are under the age of 62.  Instead, if you apply for benefits you will automatically receive whichever is higher between the spousal benefits verses your own benefits.

If you have already done some planning for social security and fall under either one […]

Should people save for retirement or pay off loans?
People should do both at the same time: always start saving for retirement as well as pay on debt. Some leading personal finance experts focus completely on debt, but I believe that saving for retirement is very valuable to have the habit as early as possible even if the amount is small. The fact is that you will always pay your debts because there is a reminder each month asking for payment and if you do not pay someone will even give you a call. However, with retirement saving there is no request to send payment each month and nobody calls if you forget to send it. Essentially, it is crucial to view saving for retirement just like a bill because it really is. It is paying a future bill when you no longer have a job or income producing options in life. Pay both like they are bills and this will curb some of your spending habits while at the same time preparing for the future.

Another downside to paying off all your debts first is that you will always be tempted to take on more debt to replace what you paid off. Companies are always doing their best to hook you with another deal. If you already have a debt to income ratio that is too high to qualify, then you may not qualify which will possibly keep your spending in check. At the same time you are paying your future bills by saving for retirement. If your employer matches some of your retirement contribution, then you are really better off with doubling your savings right off the start.

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Interested in learning more? Contact Auxan Capital Advisors, […]