Changes to Social Security Are Coming Soon

In the Bipartisan Budget Act of 2015, Congress enacted changes that effectively eliminates “loopholes” in Social Security. Two popular claiming strategies will be phased out which could reduce the amount of social security income available over a lifetime.

The first strategy, file and suspend, will no longer be available after April 30, 2016. This strategy allows one spouse to start receiving the spousal benefit before the other spouse is ready to take his own benefit. An example of this would be Bob and Mary are both 66. Bob’s wants to delay his benefits until age 70 to take advantage of the maximum delayed credits of a 32% increase. However, Mary wishes to start taking her spousal benefit now and receive half of Bob’s social security. Bob would file and suspend his payments allowing his benefits to continue to grow and allow Mary to take her spousal benefit now.

This strategy was intended to encourage individuals to work longer and benefit more from social security later on. Due to budget cuts, this strategy will be phased out. Individuals turning 66 before April 30, 2016 will be “grandfathered” and can take advantage of this strategy.

Another option that will be changed is the restricted application strategy. Restricted application allows individuals with their own earnings record collect their spousal benefit while continuing to earn delayed credits. This strategy will be phased out effective May 1, 2016. This means any individual turning age 62 after this date will no longer be able to file a restricted application.

Some important things to note about these changes.

  1. The disability program will not change
  2. How earnings are calculated will be unaffected
  3. Non-working spouses will still be able to draw a spousal benefit (although this will be more restricted)
  4. Survivor benefits will still be available