Social Security Update – Couples Planning Just Got Tougher

In a previous Merriman Insight article, we wrote about the “free spousal” strategy for married couples. Shortly after that article was published, Congress passed the Bipartisan Budget Act of 2015, which was signed into law on November 2nd.  The Budget Act contained many provisions affecting Social Security. One such provision effectively ended the ability to employ the “free spousal” strategy after the 180 day transition period from the Act’s enactment date.

Many recent articles have been written about the new law changes, so we won’t reinvent the wheel here. Instead, we’d recommend this article for a detailed discussion of the changes. The main highlights are:

  • The new rules are not retroactive; anyone currently employing a “file and suspend” or “restricted application” strategy will continue to be grandfathered under the old rules, as well as those who “file and suspend” by April 30, 2016 or who plan to use a “restricted application” and are at least 62 by the end of 2015
  • Survivor benefits and claiming strategies are unaffected by the new rules
  • “File and suspend” claims initiated after April 30, 2016 will now suspend all benefits based on the claimant’s earnings record (including spousal, ex-spouses, and dependent benefits)
  • “File and suspend” claims initiated after April 30, 2016 will no longer allow the claimant to reinstate their benefits back to the original suspension date and receive a lump sum payment
  • “Restricted applications” for spousal-only benefits will no longer be available to those who are not at least 62 by the end of 2015

If you believe the new rules will impact your situation, we recommend contacting your financial advisor to review your options.

Morningstar Gives DFA’s Disciplined Approach a Top Mark

Here is yet another example of why we prefer to use Dimensional funds in our MarketWise portfolios:

Morningstar recently issued a new Stewardship Grade for DFA. The firm’s overall grade–which considers corporate culture, fund board quality, fund manager incentives, fees, and regulatory history–is an A. 

Like Merriman, Dimensional believes in the efficiency of markets, places a focus on academics and solid research, and doesn’t give in to chasing investment trends. Read Morningstar’s full analysis of the firm’s corporate culture here.

Merriman INSIGHT – Add Thousands to Your Lifetime Social Security Benefit

Shortly after the article below was published, Congress passed the Bipartisan Budget Act of 2015, which was signed into law on November 2nd. The Budget Act contained many provisions affecting Social Security. One such provision effectively ended the ability to employ the “free spousal” strategy after the 180 day transition period from the Act’s enactment date. Read the highlights of the new law changes here.

In helping our clients make smart decisions with their money, we often spend a lot of time on the subject of Social Security (SS). The rules are complex, but the decision of when and how to claim SS can have a big impact on the quality of life for most families. Thus, it’s a very important decision with long-term ramifications. The good news is your advisor can help you evaluate your options so you’re well positioned to make the best decision for your particular situation.

Evaluating all of the available claiming strategies for SS is beyond the scope of this article (and would bore most people to tears), so I’d like to focus on one particular strategy that I think has tremendous value: the “free spousal.” I’ll describe it using a real life example, although I rounded the numbers for simplicity.

“Henry” and “Wilma” are both 66. Henry is still working, and although he is qualified to claim SS benefits now, he decides to wait because they’re able to live comfortably on his salary alone. His benefits at age 66, which is full-retirement age (FRA) in this example, would be $2,700 per month, but delaying the benefits will earn him 8% more each year until age 70. By that time, his benefits would jump to around $3,600 per month.

Wilma is retired and has her own SS benefits. She’d receive $1,800 per month if she claims at FRA, but $2,400 if she waits until age 70. Since they don’t need the extra money right now, she also decides to wait.

Everything seems fine, right? They’ll receive their higher benefits at 70, which will maximize their monthly income for the rest of their lives. I’d wager that most people would be thrilled in this situation!

But they’re leaving free money on the table.

Henry should “file and suspend” his benefits at FRA. Then, Wilma should file a “restricted application” to claim her 50% spousal benefit against Henry’s earnings. By restricting her claim to just the spousal benefit, Wilma’s own benefits can continue to earn the delayed credits. At 70, they can both claim their own higher benefits, just like they had always planned to do. But by jumping through a few hoops, Wilma could receive a spousal benefit of $1,350 per month between ages 66 to 70 for free—that’s an extra $64,800 in their pockets over the four years—without impacting their original plan. Hence the term free spousal!

There are some important steps in this strategy that must be adhered to strictly. First, Henry must file and suspend his benefits before Wilma submits her application because Wilma cannot claim spousal benefits unless Henry has started his claim. The “suspend” part of this strategy allows Henry to continue earning the 8% per year delayed credits, even though he has now filed for benefits. Secondly, Wilma must clearly indicate that her claim is restricted only to the spousal benefit and not her own benefits based on her earnings history. Although she is entitled to both, she can only ever receive one at a time, and while her own benefits are higher than the spousal benefit ($1,800 at FRA instead of $1,350 for the spousal, in this example), if she elects to take her own now, she would lose out on the 8% annual increase.

If the strategy and steps above are a little confusing, that’s okay. The goal of this article isn’t to fully explain the free spousal strategy; instead, it illustrates one of the many planning opportunities your financial advisor can help you with that go beyond your investments. Maximizing your SS benefits can be complicated, but you have a wonderful resource at your disposal to help make this very important decision. We’re always available to help!

Merriman INSIGHT – This too shall pass

The stock market has delivered a very volatile week to investors, perhaps striking a nerve not felt since 2008. As I write this, the S&P 500 has dropped more than 5% in a week and almost as much today, causing many investors to recall the sickening downturn of what some called “The Great Recession.”

Since 1980, the average intra-year decline for the S&P 500 has been -14.2%, even though annual returns were positive for 27 of those 35 years, or 77% of the time.


The S&P 500 has more than doubled in value from March of 2009 , and we have gone more than 1,400 calendar days without as much as a 10% correction. This is the third longest stretch in over 50 years without such a decline. Since 1928 the S&P 500 has experienced a 10% correction almost once per year with an average recovery of 8 months.

082415TableCorrections of 20% or more for the S&P 500 have historically occurred at the end of market cycles. In the short run the S&P 500 has pulled back 5% an average of four times per year, or about once per quarter. In fact, the S&P 500 has experienced a 5% or greater pullback every year since 1995. Drawdowns of 2%-3% occur far more often, at least monthly on average. As such, pullbacks alone should not be a reason for panic.

In times of increased volatility such as we have experienced, it’s important to revisit these important lessons that are the underpinning of a successful investment strategy. read more…

Safeguarding digital property in a web-based world

At a recent technology event I attended on the Internet of Things, it amazed me how people’s lives will be touched in the future by ‘smart’ systems at home, in the car and on the go. As technology continues to gravitate toward the cloud and social networking, it’s important to look at how your digital property is distributed at the time of your death.

What is digital property?

Digital property includes:Closed lock on digital background

  • Computing devices (smartphones, eBook readers, computers, etc.)
  • Data storage devices
  • Electronically stored information
  • User accounts (including email, social networking sites, web blogs, online gaming, etc.)
  • Domain names
  • Intellectual property rights in digital property

Why does digital property matter?

Digital property is extremely personal and sentimental – this is where many now store pictures, videos and their most prized projects and conversations. Digital property can also be financially valuable – creating worlds or real estate in online games, web presence through blogs and social media, etc.

When privacy laws conflict with helping your family gather pictures and prized possessions from your best and last moments, it can cause enormous stress on your family.  read more…

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