The New Big Changes in Social Security Rules for Married Couples

The New Big Changes in Social Security Rules for Married Couples

It is fair to say that on November 2, 2015, when President Obama signed The Bipartisan Budget Act of 2015 into law, some pretty major changes happened to the way married folks get to claim Social Security benefits going forward, because the new rules effectively ended two of the popular spousal claiming strategies widely used for the past 15 years.

The somewhat good news is that for some folks there still is a window of opportunity to act and get in under the old rules. We’ll get to that later, but to make things easier to understand, let’s begin by reviewing the now old rules.  

The Old Rules

Until now, Social Security rules have allowed a worker who has reached their Full Retirement Age (FRA) – which for most folks retiring is now age 66 – to file and then immediately turn around and suspend their benefits so that they would not actually collect the checks. Why was this necessary? Your spouse could begin to receive spousal benefits from your work after you “filed” – you didn’t have to actually claim the money at the time – hence the “suspend” part. Meanwhile, by “suspending” your benefits, you would get to earn delayed retirement credits of 8 percent a year between the ages of 66 and 70, for a total of a 132 percent larger monthly check when you finally did begin collecting the money. This was advantageous for workers who desired to delay their benefits past FRA, but the law was flexible and also allowed spouses to start collecting benefits as early as age 62.

Pretty powerful, wasn’t it? It got even better if this worker’s spouse had also reached his/her FRA, because they would be able to file a “restricted” application which enabled him/her to collect their spousal benefit check while also growing their own retirement checks – assuming they worked outside the home – by earning another and completely separate 8 percent yearly delayed retirement credit. Then, whenever that retirement check had peaked or exceeded the smaller spousal check, they’d simply switch over and begin collecting the larger amount.

The New Rules

According to the new law, when you suspend your benefits, no one – including your spouse – will be eligible to collect a check based on your record. Additionally, no one will be allowed to file a “restricted” application. Now when you file to claim your spousal checks, you will receive the higher of either your spousal check or your own retirement benefits. So Congress and the President pretty much ended suspended benefits.

Now to the grandfathering opportunity I mentioned earlier. First, if you are age 66, you can still use the old file-and-suspend rule, but you must file your application with the Social Security Administration by Friday, April 29, 2016. Second, if you were 62 or older by December 31, 2015, you will still be allowed to file a restricted application. I must mention, though, that if you are already collecting benefits, you are not impacted by the changes.

Obviously, this will potentially impact millions of families in the coming months and years. Retirement income plans may need to be revisited and reanalyzed to respond to these changes. But that’s assuming that your advisor knows as much as he/she should know about Social Security in the first place. If you need assistance to revise your retirement income plans, please contact Laser Financial Group at LaserFG.com or call 877.656.9111 for a complimentary review.