Congress made several changes to Social Security last year as a part of the Bipartisan Budget Act of 2015.  The purpose of these changes is to help shore up the system’s solvency and close what many believe is an unintended loophole that favors higher income earners.  Significant changes include:

  • File & Suspend.  Some pre-retirees intended to file for their benefits at FRA (full retirement age) and then immediately suspend taking their benefits until a later date.  This popular strategy enabled their spouses to file for spousal benefits, while allowing the other partner to earn delayed retirement credits.   Starting May 1, 2016 to earn a spousal benefit, the other spouse must now be receiving their own retirement benefit, thus eliminating the file and suspend strategy.  However, anyone born prior to April 29, 1950 (those age 66 and older) can still select this option until April 29, 2016.  Anyone over age 66 who was considering this strategy needs to act fast and contact your local Social Security office immediately.
  • Filing a Restricted Application.  You can still file a restricted application for spousal benefits but, if your retirement benefit is higher than your spousal benefit, you will now be “deemed” to be filing for your retirement benefit regardless of the age at which you file. Previously, only those who filed for spousal benefits prior to their full retirement age (FRA) were forced to take the higher of the two benefits. If you waited until FRA you could receive a lower spousal benefit and allow your higher retirement benefit to earn delayed credits.  That is no longer the case.  What this means is that if your retirement benefit is higher than your spousal benefit you will not qualify for a spousal benefit. This will result in a permanent reduction in benefits if you file prior to FRA.  Anyone who turns 62 or older in 2016 is unaffected by this change and will still be able to file a restricted application when they reach FRA and allow their retirement benefits to earn delayed credits.
  • Retroactive Payments.  Previously you could obtain retroactive lump sum payments for certain delayed benefits.  That has now been eliminated.

Social Security is an important resource that can help make all the difference in a dignified retirement.  It cannot be outlived, it is protected from inflation and it is guaranteed.  Be sure to consider all your options when incorporating Social Security into your retirement planning.