On November 2, 2015, Social Security benefits claiming strategies that have been taken for granted effectively became obsolete for future retirees. A summary of the key points of the Social Security provisions within the Bipartisan Budget Act of 2015 is listed below. However, it is cautioned that these provisions could become modified; we will keep you informed of any significant changes. If you fit a scenario that is not mentioned below and you have questions, please be in touch.
For those currently receiving benefits:
If you are currently receiving Social Security benefits or are currently taking your spousal benefits and postponing your own benefits in order to earn delayed retirement credits, then you will not be affected. You will be able to continue collecting the spousal benefit and switch to your own retirement benefit at age 70 or before.
For those who are married and age 65 ½ or older
The new provisions, which will take effect six months after the enactment of the law, have effectively made the “file and suspend” and “restricted application” claiming strategies obsolete. The new rules only allow spouses to claim a spousal benefit if one spouse has already started to collect their own retirement benefit. Prior to the provisions, one spouse could collect his or her spousal benefit (50% of the other spouse’s benefit at full retirement age) while the other spouse could earn delayed retirement credits (i.e., allow or up to 8% growth in his or her own benefit up until age 70).For example, (assuming spouse 1 and spouse 2 are our married couple) spouse 1 is no longer allowed to file for benefits and immediately suspend benefits for the purpose of “opening” a benefits record. The “file and suspend” process allowed spouse 2 to claim a spousal benefit, while spouse 1’s benefit earned the delayed retirement credits between the ages of 66 and 70.
In summary, the provisions state that no family member is able to claim a benefit based on a primary beneficiary’s record while the beneficiary’s benefit is in suspension.
However, as stated above, these rules do not take effect until six months after the enactment of the law. So if you will be at least age 66 by the end of April 2016, you can still use the suspension provision that allows your spouse to claim a spousal benefit.
For those who are married and age 62 or older
If you will be age 62 or older by December 31, 2015, you are exempt from the new rule that eliminates the “restricted application” to claim only a spousal benefit starting at your full retirement age 66. Therefore, when you are at least age 66, if at that time your spouse is receiving or suspending his or her own Social Security benefit, you will be able to claim only your spousal benefit while delaying your own benefit until age 70 to earn delayed retirement credits.
The good news: Since the new rules regarding voluntary suspension of benefits do not take hold for another six months, if your spouse is currently age 65½ or older, he or she still has time to file for a suspension of benefits.
Whether you should take advantage of being grandfathered under the old rules, depends on your specific circumstance (your age, your spouse’s age, the amount of your Social Security benefit retirement and spousal benefit).
For those who are under age 62
The provisions did not alter the rules for earning delayed retirement credits (the annual 8% increase in benefits for delaying receiving benefits until up to age 70). In other words, if you will not turn age 62 until 2016 or later (you were born in 1954 or later), you will be able to increase your retirement benefit by suspending claiming until up to age 70.
The rules are subject to additional changes and the claiming strategy that works best for you will be dependent upon your unique situation.
For those who are surviving spouses
The legislation has not changed the rules that apply to surviving spouses. You will still have the options for deciding how to maximize your lifetime Social Security benefits.
If you have any questions, or if we can help think with you about your situation, please be in touch.