You may have heard a lot of buzz recently about the elimination of key Social Security claiming strategies and are wondering what these changes mean for you.
In a nutshell, claiming options, especially for marrieds, are about to become narrower. Of particular note, there is a limited window of time until April 29, 2016 for those age 66 or older to take advantage of the “File-and-Suspend” option available under existing rules.
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As you are probably aware, SS benefits can be claimed as early as age 62, but claiming before full retirement age results in a permanent reduction of benefits. What you may not know is that waiting to claim benefits until after full retirement age increases benefits by 8% per year up to age 70.
Under existing law, individuals can file for benefits once they reach full retirement age and then immediately suspend receipt of benefits. Those who do so not only continue to earn the 8% per year delayed retirement credit, but also open the door for a spouse to start claiming benefits based on the record of the individual who filed and suspended – either because the spouse (age 62 or older) has no benefit of his/her own or because the spouse (full retirement age or older) wants his/her own benefits to continue to grow.
Under the new law, which will take effect after April 29, 2016, File-and-Suspend will not be an option for the purpose of triggering spousal benefits. If an individual suspends benefits, all benefits payable under that record will be suspended.
Those who will be age 66 or older on April 29, 2016 have until that date to “File-and-Suspend” under existing rules. Additionally, those who turn age 62 or older by January 1, 2016 retain certain rights to claim benefits under a spouse’s record while allowing their own benefits to continue to grow. For more details and a description of other File-and-Suspend benefits that are applicable to singles as well, we recommend the following article by Michael Kitces.
By Joanne Tackes, CPA
Joanne’s methodical approach to financial planning leaves no stone unturned.