New Social Security Law is Passed

On November 2, 2105, President Obama signed the Bipartisan Budget Act of 2015 into law. This act makes important changes to Social Security claiming rules for retirees which I have discussed in this column over the last two years.   How the rules are changing:

Restricted Application: This strategy will be phased out. Previously, an individual eligible for a spousal benefit could elect to receive that benefit while allowing his or her benefit to grow, then switch to their own retirement benefit once it was maximized. Under the new law, restricted applications will no longer be available.

Voluntary Suspension: Previously, an individual could file for benefits, then suspend the receipt of the benefits, allowing their benefit to grow while a spouse could claim benefits based on that filed amount. Under the new law, the spouse will no longer be able to collect a spousal benefit during the time the wage earners benefit is suspended.

Filing strategy impact for four scenarios:

Married Individuals:

  1. A) Anyone who has already executed a restricted application or voluntary suspension will not be impacted. B) Date of Birth May 1, 1950, or earlier – File and Suspend is available if filed by April 30, 2016. C) Date of Birth on or before January 1, 1954 – Restricted application is available after the individual reaches full retirement age. Couples should consider planning to capture these benefits. D) Born January 2, 1954 or after – Neither Voluntary Suspension or Restricted Applications will be available.

Widows: The law does not change widow benefits. Widows will continue to have the opportunity to restrict an application to only widow or only retirement benefits and later switch to the other benefit.

Divorced: The impact is very similar to married individuals. The important client situations to consider are for those born on or before January 1, 1954, who still have access to the restricted application and related spousal benefits and for those born after, who do not.

Single: There is generally no impact on Social Security filing for individuals, with one notable exception. Individuals born May 1, 1950, or earlier, who plan on delaying filing past Full Retirement Age, should file and suspend as soon as eligible and by April 30, 2016. This would preserve the rule whereby an individual would preserve the option to request a retroactive lump-sum payment should their circumstance change while the benefits are suspended.

So if you have previously looked at the filing strategy you were planning on making or you have not yet looked what options are available to you, it is imperative that you sit down with an advisor as soon as possible because the first cutoff date for choices is April 30, 2016.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.  The preceding are hypothetical examples and is not representative of any specific scenarios. Your results may vary.

Vincent J. Catania, CFP®, MBA is a Registered Representative with, and securites offered through, LPL Financial, Member FINRA/SIPC

Image source: Kiplinger.

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