One of the key components of your Retirement Income Plan, Social Security, received a bit of a facelift recently. Two claiming strategies used by married couples, known as the “File and Suspend” method and the “Restricted Application for Spousal Benefits” method were eliminated for most future retirees. Depending on your age, you may still have time to take advantage of the old rules.
How did “File and Suspend” work?
A worker who had reached full retirement age could file for retired worker benefits in order to allow a spouse or dependent child to file for spousal or dependent child benefits. The individual could then suspend the retired worker benefit in order to accrue delayed retirement credits until claiming an increased worker benefit at a later date, usually age 70. (Remember - Social Security Benefits grow 8% per year between full retirement age and age 70. For a refresher on this rule, follow this link.)
How does it work now?
A worker can still “file and suspend” up until April 30, 2016*, and accrue delayed retirement benefits. However, no one can collect benefits on the worker’s earning record during the suspension period. Effectively, this ends the benefit of “filing and suspending”, as opposed to just waiting past full retirement age to file. In addition, an individual is prohibited from receiving retroactive benefits for a period of voluntary suspension.
How did the “Restricted Application” work?
A worker who had reached full retirement age could file a “restricted application” for spousal benefits only (and let their own benefit accrue delayed credits), if their spouse (who had also earned enough work credits for retired worker benefits) had already filed for retired worker benefits.
How does it work now?
Individuals born in 1954 or later who file a benefit application (for either spousal or their own retirement benefit) will be deemed to have filed for both, and will receive whichever is higher. That means you can’t start one type of benefit and switch to the other type.
Can I still take advantage of the old strategies?
Here is some good news: if you are already using a File and Suspend or a Restricted Benefits strategy, you can continue doing so. You are grandfathered by the Social Security Administration. Also, if you are a surviving spouse, you are eligible for both a survivor benefit and your own retirement benefit. You can file for a spousal benefit, let your own benefit increase, and then claim your own benefit if it grows to be higher than your spousal benefit.
Here is some OK news:
If you will be at least 66 by April 30, 2016* you might be able to use the file and suspend strategy, allowing a spouse or dependent child to receive a benefit while delaying and increasing your own. To file a restricted application, you must have attained age 62 by December 31, 2015. When you file, your spouse must have already claimed his or her own retirement benefit.
To learn more about the recent changes, potential future changes, and the planning opportunities that still exist, join the HCM Wealth Advisory Team and Sue Denny, from the Social Security Administration office, for our seminar and lunch on Wednesday, March 16th. More information is available here. To reserve spots for you and your guest(s), call 877-598-5120 or email [email protected].
*April 30, 2016 is the date which current IRS publications seem to indicate will be the final date for requests to suspend benefits and still accrue delayed credits. This is not official…yet. The Social Security Administration and Sue Denny will provide some additional information at our upcoming seminar.
If you’d like to explore this further, please contact Steve Hengehold via email [email protected] or 877-598-5120.
Date Posted: 02/11/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Wealth Accumulation or Retirement Income Plan with an HCM Wealth Advisor, please give us a call – 877-598-5120. Located in Cincinnati, Ohio, we serve clients in 23 states, and we’d love to help.