On November 2, 2015 President Obama signed the Bipartisan Budget Act of 2015. This act brought into effect changes that eliminated the ability to use popular strategies that allowed retirees to boost their social security income. This article will provide you with an overview of how the new rules might affect you. As well as what other option are available.
Social Security Changes
The bill uses a provision called the Closure of Unintended Loopholes. It negates the popular file and suspend and restricted application for a spousal benefit strategy. These strategies were used as ways to maximize social security benefits.
File and Suspend
Before the recent changes, you could file to receive your social security benefit at full retirement age. Then your spouse or dependent child could file to receive a spousal or dependent benefit. Once they were receiving their benefit, you would then suspend your benefit until a later date. This would be after you had the chance to accrue delayed retirement credits. This increased social security income because it allowed couples to draw income with the spousal benefit, while they were simultaneously increasing their own.
Due to the signing of the bill, this strategy will become obsolete come April 30, 2016. If you file for a suspension after this date, your spouse or dependent cannot collect a benefit during your suspension period.
Under the other rules, if you were married and had reached your full retirement age, you could file a restricted application for spousal benefits after your spouse had filed for their benefits. In this situation, you were able to collect spousal benefits while delaying filing for your own benefit. This allowed you to collect a check while having the opportunity to accrue your own delayed retirement credits. Which meant you were able to increase your future benefit.
With the new changes, if you were born during or after 1954 and choose to file an application, you will be considered to have filed for both your benefits and your spouse’s benefits, and you will receive whichever benefit is higher. Basically put, you will have to choose between your benefit and your spousal benefit. You will not be able to use both. Visit the following link to apply for a social security card – www.application-filing-service.com.
Though the clock is ticking, time has not yet run out for you to take advantage of these strategies. If you are currently age 66 or older, or you will be by April 30, 2016, you may still be able to use the file and suspend strategy. If you wish to file a restricted application and claim only spousal benefits by age 66 you must be at least 62 by December 31, 2015. When you file, your spouse must already have begun to claim their benefits or filed and suspended before the effective date of the new rules.
Reason for the Changes
The Senior Citizens Freedom to Work Act of 2000 put into place the opportunity to use the aforementioned strategies. The original purpose of the Act was to allow you to change your mind if you decided to work longer. Even though the claiming strategies that were produced are legal, it was not what Congress intended to have happened. Thus they used the recent bill to get rid of the file and suspend and restricted application strategies so as to save money.
Already using one of the Strategies?
If you already have taken advantage of the file and suspend or restricted application strategies, nothing will change for you. You will be able to continue on with your retirement plan as normal.
Benefits for Surviving Spouses
There have been no changes to the rules apply to the surviving spouses. If you are eligible for a survivor and retirement benefit, you will have the option to receive one benefit first. Then you can switch to the higher benefit later.
What Planning Opportunities are Still Available?
Now that the file and suspend and restricted application strategies are being phased out, the age you choose to begin taking your benefits will be crucial in maximizing your lifetime social security income. A Certified Retirement Planner can generate reports for you that will calculate the optimal age for you to file for your benefits.
Interested in learning more? Visit our website at www.WealthGuardianGroup.com.