Big Changes Coming to Social Security Planning


Featured, Personal Financial Planning | by: Bob Brandt, CFP®

Last year, Congress passed budget legislation that will dramatically change the options available to you when choosing how your Social Security benefits will be calculated. Review your plan now so you won’t be caught off-guard.

No more Social Security “File and Suspend” option

Currently, at age 66, you can file for your Social Security benefits but choose to “suspend” them so that you can continue to gain credits for delaying, typically to age 70. This has been a popular strategy: the credits you earn by delaying can increase your benefit amount by up to 8% per year, yet by filing now you open the door for your spouse to claim a benefit on your earnings right away.

After April 29, 2016, this strategy for a spouse will change. If you will be age 66 within a six-month window after the law is enacted, you may still take advantage of the “File and Suspend” option. Otherwise, the only use of “File and Suspend” will be for those people who claimed reduced Social Security benefits before full retirement age. They will still be able to suspend benefits in order to earn delayed retirement credits of 8% per year between ages 66 and 70. No one will be able to collect benefits when the primary beneficiary files and suspends.

No more Social Security “Restricted Application” option

If you can claim benefits on both your own earnings record, and as a spouse on another’s earnings record, this applies to you. Until this year, you could file a “restricted application” – this meant you could receive benefits as a spouse but hold off on claiming benefits on your own earnings record. This strategy made it possible for you to have some benefits coming in now, while still earning delayed credits on the benefits you plan to claim in the future on your own earnings record.

After April 29, 2016, this option will be eliminated for those younger than age 62 at the end of 2015.

Steps to take now

The important thing is to find out if your retirement plan was designed using one or both of these strategies. If so, you will want to run the numbers again to discover if there will now be a shortfall that you need to make up in some other way. Also, note the effective dates so you can take action now if you are still eligible for one of these strategies.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.