By: Joe Delaney
If you are at least (or nearly) 62 years old, changes to Social Security brought about by the recently passed Bipartisan Budget Act of 2015 may affect your lifetime benefit.
Before November 2nd, 2015
There were applicable filing strategies that helped married couples – or those less than 10 years divorced – with unequal earning records maximize combined benefits by receiving or suspending benefits at strategic ages.
“File and Suspend” – Because you can’t claim spousal benefits (50% of spouses’s benefit) until the other files, it has sometimes been smart for the higher earner to file as soon as they turn 66 just so the spouse can file, then the higher earner immediately suspends benefits. Why? Because usually, delaying the receipt of benefits increases them over time. While the higher-earning spouse’s benefits are suspended, he/she accumulates delayed retirement credits that will be worth more at 70 (about 8% accumulation per year).
“Restricted Application” – Another strategy called the “62/70 split” involved the lower earning spouse filing as early as possible, at 62, so the higher-earning spouse could file a “Restricted Application” to begin receiving the spousal benefit right away, rather than the full benefit they are entitled to, for the purpose of delaying that full benefit until 70. At that point, the filing status would switch to the higher earner being the primary beneficiary, and the spouse receiving 50% of that primary benefit.
That was Then, This is Now
The law now shuts down these strategies, by no longer allowing you to A) claim benefits while your spouse’s benefits are suspended, or B) change filing status.
“File and Suspend” no longer does the spouse any good because no one is receiving benefits during the suspension. “Restricted Application” – or filing for 50% of your spouses’ benefit rather than 100% of your own – is now permanent as long as your spouse is living.
If these strategies are no longer viable, why bother talking about them at all? Because if you are of the right age, you still have a window of opportunity.
If you are already 66 (full retirement age) and you have not yet filed for Social Security, you have until May 1, 2016 to take advantage of “File and Suspend”. If you will be 62 by December 31, 2015 you may yet be able to take advantage of “Restricted Application” strategies.
Does that mean you should? Does any of this even apply to your situation? No article written for a general audience can answer those questions for you. Consult a financial advisor to see what strategies are best for your family. Don’t delay, because the best options may not be available by this time next year.
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