New Rules for Social Security

The budget agreement in the fall of 2015 did more than authorize the federal government to engage in additional borrowing; it also changed the rules for claiming Social Security. Going forward, two claiming strategies that had given some couples the potential for higher lifetime benefits may no longer be available.*

Closing the door on two strategies

Social Security strategies are built around the fact that you can start to claim benefits as early as age 62, but if you defer, the benefit can grow until you reach age 70. Each year you delay past your normal Social Security benefit date, your monthly benefit can grow by as much as 8% per year, depending on the year you were born.

Some working couples have additional claiming options, because an individual is entitled to his or her own benefit and a spousal benefit.

In 2000, Social Security introduced the concept of voluntary suspension: even after you claim benefits, at or after reaching full retirement age you can elect to stop and earn the deferral credits—thereby increasing your future benefit.

Voluntary suspension has led to a number of claiming strategies, but two will no longer be available under the new law:

Strategy 1. File and Suspend

  • The strategy: Typically in a “file and suspend” strategy, one member of a couple files and claims benefits, which allows the other partner to begin collecting spousal benefits. The filing partner then suspends his or her own benefit, which allows that future benefit to increase.
  • The change: Under the new rules, if you suspend your own benefits, not only will all benefits payable to you be suspended, but all benefits payable on your earnings record payable to other individuals will also be suspended.
  • What happens: Those who are receiving benefits now under this strategy will continue to receive them. The new rules limiting suspended benefits go into effect 180 days after the budget agreement was signed into law on November 2, 2015.

Strategy 2. Restricted Spousal Benefits

  • The strategy: This strategy allows you to file a “restricted” application for “just” spousal benefits after your official full retirement age, while allowing your own future retirement benefit to grow.
  • The change: Social Security will no longer allow certain individuals to restrict an application to spousal benefits only; upon filing the individual will be required to claim all eligible benefits.
  • What happens: If you turned age 62 or older in 2015, you will continue to have the option of restricting an application to spousal benefits only. If you turn 62 in 2016 or later, you will have to claim all your benefits upon filing.

These two strategies were often used together. One spouse files and suspends and the other claims just the spousal benefits, which allows each of their benefits to grow. That combined strategy will now be available only for those who are at their full retirement age and who claim within six months of the budget deal being enacted.

How and when to claim social security is still a strategic decision

The elimination of these two claiming strategies removes some options for couples, but it doesn’t minimize the importance of deciding when to take Social Security. If you are in good health, remember that delaying Social Security can increase monthly benefits that will rise with inflation and will last the rest of your life—no matter how long you live. This means that delaying can help improve your retirement outlook, especially if you expect to live into your late 80s or 90s.

In addition to longevity, income is an important factor to consider when making the decision to claim Social Security. For many couples, delaying the benefit for the higher earner can be particularly significant. This is because after the higher-earning member of a couple dies, the surviving spouse can claim the deceased spouse’s full benefit. So claiming the lower earner’s benefit early but delaying the benefit for the higher earner may make sense.

Weigh your options. How you claim your Social Security can make a big difference for your financial future in retirement.

* All of the information supplied here is subject to further interpretation and guidance from the Social Security Administration, which is ultimately responsible for the administration of Social Security benefits.

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