Important Changes this Month in Social Security Benefit Rules: What You Need to Know
Last fall when Congress passed the budget bill, they added a portion called “Closure of Unintended Loopholes” which primarily addresses two Social Security claiming strategies that have become increasingly popular over the last several years. These two strategies, known as “file and suspend” and “restricted application for a spousal benefit,” have often been used to increase cumulative Social Security income for married couples. The budget bill has eliminated those strategies for most future retirees, but if you are age 66 or older, you may still have time to take advantage of them, before April 30th.
File & Suspend. Under the old rules, an individual who had reached full retirement age could file and suspend their retired worker benefit in order to accrue delayed retirement credits worth as much as 8% per year. Under the new rules, After April 29, 2016 the worker can file and suspend and accrue delayed retirement credits, but no one can collect benefits on the worker’s earnings record during the suspension period. The new rules no longer allow someone to request a lump-sum payment of benefits that were suspended.
Restricted Application. Under the old rules, a married individual who had reached full retirement age could file a “restricted application” for spousal benefits after the other spouse had filed for retired worker benefits. This allowed the individual to collect spousal benefits while delaying filing for his or her own benefit, in order to accrue delayed retirement credits.
Under the new rules, an individual born in 1954 or later who files a benefit application will be deemed to have filed for both worker and spousal benefits, and will receive whichever benefit is higher. He or she will no longer be able to file only for spousal benefits.
The Bottom Line. A limited window still exists to take advantage of these two claiming strategies. If you are currently at least age 66 or will be by April 29, 2016, you may be able to use the file-and-suspend strategy to allow your eligible spouse or dependent child to file for benefits, while also increasing your future benefit. To file a restricted application and claim only spousal benefits at age 66, you must be at least age 62 by the end of December 2015. At the time you file, your spouse must have already claimed Social Security retirement benefits or filed and suspended benefits before the effective date of the new rules.
-R. Heath Morris, CFP®
Vision Financial Group
4505 Pine Tree Circle, Birmingham, AL 35243
205-970-4909, www.visionfinancialgroup.com
Investment Advisory services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a registered broker-dealer and member of FINRA & SIPC. Vision Financial Group, Inc. is independent of ProEquities, Inc.
