With the passing of the Bipartisan Budget Act of 2015, some of the benefits that people could take advantage of have been eliminated or limited, effective April 30, 2016. These changes have led some to wonder where that leaves them and their benefits going forward. Given all the articles that have flooded the financial media since the change—and the confusing nature of everything the Social Security Administration does—we wanted to provide you with a simple explanation of the changes to Social Security benefits and how it will affect you.
Here are the facts:
The “file and suspend” strategy is no longer an option.
File and suspend allowed one spouse of a married couple to file for social security benefits at their full retirement age, but then suspend taking those benefits until a later date (usually 70) to allow the benefit to grow at 8 percent each year. However, because they had already filed, the other spouse could begin receiving the spousal benefit without filing to claim their own retirement benefit. This meant that both spouses could delay until 70 and receive the largest combined benefit possible. This was very beneficial, but it has been closed off to everyone not 66 before the end of April 2016.
The “restricted application” strategy is still open if you were born before January 1, 1954.
The restricted application allows the spouse of someone currently claiming their Social Security benefits to claim the spousal benefit (up to half of their spouse’s benefit). For example, if John Doe were age 70 and claiming his Social Security benefits, his wife Jane, age 67, could claim her spousal benefit for 3 years until she turned age 70, when she would claim her own benefit. This strategy can still be very beneficial to clients, given the thousands of dollars that can be claimed during the years prior to the younger spouse reaching 70.
Though these changes have limited these benefits to people who turned 62 on or after January 2, 2016, for each individual situation, there may be opportunities to use different claiming ages and strategies to maximize your Social Security benefits.
