Changes to Social Security Benefits

by Karen Atchley, CPA

Partner at Atchley & Associates, LLP

 

THIS IS SOMETHING THAT MAY BE OF INTEREST TO YOU.  I am not a social security administration expert by any means but I noticed this law change  may affect you or your spouse based on your ages.  You can contact the social security administration  if you want more information, I can give you the name of a person to consult with who does hold themselves out as having experience in this area.

Under the new Social Security rules included in the Bipartisan Budget Act of 2015, the ability to temporarily claim just spousal benefits is being phased out.  Married people or divorced spouses who are 62 or older by the end of 2015 will retain the right to claim only spousal benefits at age 66, ONLY if their spouse has filed for benefits.  The way I understand it, those 66 or older MUST file for benefits by April 30, 2016, even if they want to immediately suspend getting current benefits until a later time in order for his/her spouse who is or will be 62 years of age by the end of 2015 (or other eligible family member) to claim spousal benefits.  If the spouse who is 66 years of age has not filed for benefits by April 30, 2016, then their spouse will not be able to file for spousal benefits until their spouse starts receiving benefits.

Below is a bullet point of the basics:

  • At age 66 one spouse can file for social security benefits but suspend payment.  This allows their benefits to grow by 8% per year so that when they do begin taking payments later, say at age 70, their benefit will be larger.
  • The alleged “loophole” was that a family member could claim social security benefits based on the earnings of the person who has filed and suspended their benefits, so the household could still receive a benefit payout while at the same time taking advantage of the 8% growth of benefits for the spouse who filed-and-suspended.
  • What’s changing is that after May 1, 2016,  a family member can no longer claim benefits against the file-and-suspend spouse’s social security unless that spouse also receives payment of his/her benefits.  In other words, if the spouse suspends payments, family members cannot collect benefits while payments are suspended.
  • Anyone who is already age 66 and using this strategy/”loophole” will be grandfathered, but anyone who wants to begin implementing this strategy must file-and-suspend by May 1, 2016, assuming they will be at least age 66 by then.
  • Another strategy is the restricted application approach where a spouse who reaches full retirement age at age 66 can file an application to only collect their spouse’s benefits.  This allows their own benefits to essentially be suspended and earn delayed credits (a premium for taking your benefits later, up until age 70).  This is also changing – in order to take advantage of this strategy, if a spouse will turn age 62 before the end of 2015, that spouse can begin collecting his/her benefit while the other spouse files a restricted application and chooses the spousal benefit.  If not 62 before the end of 2015, the “restricted application” strategy will no longer be available.

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