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The Future of Social Security Claiming Strategies

| December 11, 2015

The Bipartisan Budget Act of 2015 was recently passed and signed into law as a way to avoid a government shut-down due to previously-imposed debt ceiling limits. Part of this bill results in closing so-called “unintended loopholes” by removing the popular claiming strategies such as “File and Suspend” and “Restricting an Application."

Going forward, those who wish to File for their own benefit and Suspend that benefit to allow a spouse or dependent to collect on that record after the May 1, 2016 deadline will be subject to the new rules. The new rules state that no spouse or dependent may collect benefits based on a worker's record until that worker actually begins receiving benefits. As a result, there is limited, if any, practical use to the “File and Suspend” strategy for those affected by the new law.

“Restricting an Application” will no longer be available for those individuals turning 62 after January 1, 2016. Very simply, this means that when an individual files for Social Security benefits at their full retirement age (FRA), they will no longer be able to pick which benefit they want to receive – their own or spousal. Previously, upon reaching FRA, a married worker could file for benefits and restrict their application to receive only their spousal benefit and allow their own benefits to earn Delayed Retirement Credits of 8% per year simple interest. Now all workers who turn 62 in 2016 or later will receive the higher of the available benefits when they file.

To be clear, these changes do not affect those who have already elected these claiming strategies.

Unfortunately, there is not much that can be done for the majority of those affected. However, if you fall into one of these two groups, you may still be able to take advantage of the old rules:

  1. Those who are or will be 66 by May 1, 2016:
  2. Those who are already 66 but have yet to file for Social Security benefits, or those who will turn 66 within the six month grace period for the new law to take effect, still have the right to File and Suspend under the old rules. Those who are eligible to do so must also elect to File and Suspend before the deadline in order to be grandfathered in.
  3. Those who are or will be 62 by January 1, 2016:
  4. Those who are already 62 but have yet to file for Social Security benefits, or those who will turn 62 by the end of 2015 will still have the right to restrict their application upon them reaching their FRA. There is no deadline to act, but this strategy is only available for those who reach their FRA or older.

Other important notes:

  • Divorced spouses are subject to the same rules as mentioned above.
  • Survivor benefits are not affected by these new rules. They can still choose to claim survivor benefits first and switch to their own benefit later, or vice versa.
  • Anyone who file and suspends on or after the deadline (May 1, 2016) will no longer be able to request a lump sum payout of suspended benefits if their circumstances change.

This material presents a general overview of certain rules related to Social Security and the discussion presented is not individualized for your particular situation. The information presented is based on current law which can be changed at any time.