Changes to Social Security Planning Strategies
Under the budget bill passed by Congress and signed by the President in November of 2015, two important Social Security planning strategies ceased. The most significant change was the loss of “file and suspend”. Through this strategy, the spouse with the highest earnest could claim his or her benefit at full retirement age, permitting the lower earning spouse to claim and earn the spousal benefit. The higher earning spouse would then immediately suspend his or her benefit until reapplying in the future. This strategy allowed the lower earning spouse to obtain the monthly spousal benefit while the higher earning spouse delayed receiving Social Security benefits, accruing an eight percent (8%) increase in his or her benefits for each year delayed until reapplying, up to age seventy. The effective date of the law was May 1, 2016. Therefore, if you were able to file and suspend, you should have considered doing so before May 1st, or the ability to effectively utilize this strategy was lost. Those who previously used this strategy continued to receive their benefits past the May 1st deadline.
Another strategy, often called “file as a spouse first” or “restricted application”, also ceased. Through this strategy, the applicant would file to receive spousal benefits first at full retirement age allowing their own retirement benefits to increase at eight percent (8%) per year for each year delayed up to age seventy. The applicant would subsequently file for his or her own retirement benefit, enjoying the eight percent (8%) increase for each year he or she delayed. This strategy allows the applicant to obtain a Social Security spousal benefit at full retirement age. While achieving a greatly increased Social Security retirement benefit in the future. Fortunately, there is no longer a window to use this strategy. Those who turned age sixty-two by January 1, 2016, were able to file these applications when they attained full retirement age, even if such age occurs a few years in the future. In other words, this kept the door open for those who were age sixty-two or older after January 1, 2016 to utilize this strategy.
Fortunately, the most popular strategy, delaying benefits, is still available. An individual may suspend his or her own retirement benefits until full retirement age or later, up to age seventy, achieving increased benefits for each year they delay.
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