The Bipartisan Budget Act of 2015 was signed into law by President Obama on November 2, 2015. The budget agreement suspends the debt limit through March 15, 2017, and creates a framework for a spending bill to fund the federal government for the next two fiscal years. As part of the deal, lawmakers agreed to some major changes for Social Security, including the end of two Social Security claiming strategies — “file and suspend” and “restricted application” for spousal benefits. These strategies have given couples the potential for increased lifetime payouts.
Changes to “File and Suspend” Social Security strategy
One of the biggest changes is the elimination of the “file and suspend” strategy. Social Security currently allows spouses to file and suspend their own benefits, helping them earn delayed retirement credits of 8 percent annually from age 66 to 70 while their spouse is able to receive a spousal benefit. Under the new law, this will no longer be possible for those who have not started the strategy by May 1, 2016.
All Social Security recipients currently in the file and suspend strategy up to the deadline will be able to continue. The remaining individuals, that are not able to start the strategy by May 1, 2016, will not be able to suspend a benefit and continue to pay out spousal benefits. Effectively, they must receive Social Security benefits in order for their spouse to receive a spousal benefit.
Changes to “Restricted Application” Social Security strategy
Also, the restricted application will be eliminated for all those who do not attain the age of 62 by December 31, 2015. This effectively eliminates the “claim your spousal benefit now, and your own benefit later” strategy for those under the age of 62 by year end 2015.
In the future, the only way individuals (who did not turn 62 by the end of 2015) will be able to receive a spousal benefit is if the spousal benefit is greater than their own Social Security benefit and their spouse is actually receiving Social Security benefits.
What are my options for claiming Social Security?
Many of our clients have had projections run on when to claim their Social Security in order to obtain the most they can from their benefits. We have completed the process of updating projections for those who will be impacted by these benefit changes and spoken to most of them about how these changes affect them.
If you have put off this aspect of your planning and will turn 66 prior to May 1, 2016 then please call the office to schedule a time to meet as soon as possible. There are steps for you to take prior to the deadline that will give you more options later … but you have to make the election by April 30, 2016.
Please share this information with those friends, colleagues and family members who turn 66 prior to May 1, 2016 … it could really help them as a misinformed decision could potentially cost thousands of dollars in lost benefits.
We will be conducting a couple of presentations on Social Security planning in our conference room. Please feel welcome to invite a guest to the events scheduled on the following dates. Once we have scheduled a date we will email you and let you know how to register.