A measure was approved by the House and passed by the Senate near the end of 2015 to bring three popular Social Security claiming strategies to an end:
- File-and-suspend: When a spouse reaches full retirement age, he/she may file for Social Security benefits and immediately suspend them until age 70 to continue accruing delayed retirement credits.
- Filing for a restricted claim of spousal benefits: When a spouse reaches full retirement age and has yet to file for any benefits, he/she may file a restricted application which allows him/her to claim spousal benefits if the other spouse has already filed for benefits.
- Retroactive Lump Sum Payments: A person with suspended benefits may elect to request payments retroactive back to their filing date.
What Do These Social Security Changes Mean For Me?
All of these strategies for claiming Social Security have been standard ways of ensuring that the recipients could potentially generate the greatest amount of income. These tactics are so common that it would be difficult to find a retirement plan where these approaches have not already been implemented. Changes in these areas will affect:
- File-and-suspend: Under the new rules an individual must file for Social Security and commence benefits in order for a husband or wife to commence spousal benefits. (For those who turn 66 by April 30, 2016, there is still time to act on the old file-and-suspend structure).
- Filing for a restricted claim of spousal benefits: After May 2016, when a spouse files at age 62 or above, that person will fall into the “deemed filing” rule. Which means a spouse can only receive their own benefit, or spousal benefits, and you won’t be able to switch it. In the past you could defer, then switch options, allowing for a bigger check.
- Retroactive Lump Sum Payments: Under the new rules Social Security beneficiaries can no longer retroactively suspend benefits. This has been most applicable to people with drastic changes in their financial lives or health. It permitted you to create a plan, but alter it and receive retroactive benefits. Now, there would be no retroactive benefits; you would just start adjusted benefits going forward.
How integral is Social Security to retirement?
Many people depend on Social Security for an extra boost beyond retirement funds to help get them through their retirement years. However, Social Security was never intended to be the primary source of retirement income. Those who want to thrive during retirement are establishing other advantageous ways to save both pre-tax and post-tax dollars.
What Should I Do About This?
The fundamentals of Social Security are not changing. How benefits are being calculated are not changing – the only changes are a few loopholes in the system.
If you or someone you know is going to reach retirement age before May 1st, 2016 then please have them call us. (801-274-1821). Retirees are eligible for Social Security opportunities that will expire soon. Increasing retirement income is a luxury you definitely want to make time for.