By LouAnn Schulfer, AWMA®, AIF®, Accredited Wealth Management AdvisorSM, Accredited Investment Fiduciary®
Recently I wrote an article titled Big Changes to Social Security Planning for Some. The changes to Social Security are due to section 831 of the 2015 Bipartisan Budget Deal that was signed into law on November 2, 2015 (you can read it at congress.gov).
I explained how the changes will affect couples who planned on using the “file and suspend” strategy. The elimination of “file and suspend” goes into effect on May 1, 2016. This is important, as it marks a milestone age and date if you are eligible; if you turn full retirement age (66) before April 30, 2016, you are still eligible to take advantage of the “file and suspend” strategy.
You must, however, do the file and suspend prior to April 30, 2016, even if you do not want your spouse to begin receiving benefits immediately, to take advantage of this provision. “File and suspend” allows a spouse who has reached full retirement age to file for benefits, immediately suspending them.
“Filing” for benefits allows benefits to be paid to either you, a spouse or dependent of yours. “Suspending” the benefit suspends YOU from receiving money from social security, but your spouse or dependents still can while your personal benefit continues to grow by earning “delayed retirement credits” until the maximum age of 70. This allows a married couple, for example, to receive ½ of the social security benefit through the spousal benefit option, by the spouse who has reached FRA having filed and suspended. Both spouses’ own personal benefits can then continue to grow until the maximum age of 70.
“Restricted Application” is the second major change for social security recipients. “Restricted Application” allows a person who has reached full retirement age to file for benefits, “restrict” THEIR personal benefits and collect a spousal benefit from their spouse who has reached FRA and also filed for their benefits.
Once “file and suspend” is eliminated, the spouse who’s benefit is being claimed upon, will have to be receiving their monthly check from social security (in other words, they cannot take advantage of the delayed retirement credits by allowing their benefit to grow while their spouse collects the spousal benefit).
Restricted application will still be available to anyone who turns 62 prior to the end of 2015. That means if your spouse has reached FRA, files, and receives their benefit, you can file at FRA and receive your spousal benefit, delaying your own benefit and switching over at a later date when your benefit, through delayed retirement credits, becomes higher than your spousal benefit.
If you are not turning 62 by the end of this year, when you file for benefits, you will be deemed to be filing for all of the benefits that you are eligible for (for example, your own, and your spousal benefit if you are married, or if you were married for at least ten years, are divorced and not remarried). You will then receive the higher of the two benefits, and will not be allowed to switch later on (to your own benefit which could have grown to a higher amount through “delayed retirement credits”).
You can check your annual social security statement at ssa.gov. I have found their site to be easy to use and very helpful. Your local social security office is also a great resource.
To understand how social security benefits will coordinate with your retirement income strategy, I highly recommend that you do a more complex analysis. There are still decisions to be made that once elected, cannot be undone. Seeking the advice of an experienced professional is a great idea.
To summarize, there are two significant ages, one with an action step with respect to the law changing. If you turn full retirement age (66) by April 30, 2016, you can still take advantage of the file and suspend option. You must file and suspend with social security by that date, even if you do not take advantage of it immediately. Second, if you turn 62 prior to the end of 2015, you will still be eligible for restricted application at your full retirement age.
You do not have to do anything other than celebrate your birthday and an extra cheer that you will be eligible. If you are younger than 62 by the end of 2015, the good news is that you are young! You too, can celebrate that.
(Author’s note: Due to industry regulations, I am prohibited from responding to any online comments. I welcome you to contact me via e-mail: firstname.lastname@example.org).
Schulfer is co-owner of Schulfer & Associates, LLC Financial Professionals and can be reached at (715) 343-9600 or email@example.com. Find her blog at www.SchulferAndAssociates.com