MAKING LESS OF YOUR SOCIAL SECURITY BENEFITS
Effective April 29, 2016, the law has changed regarding Social Security Benefits.
- Suspend and Restart will be Gone. Married couples can no longer use the “file and suspend” option. Under Suspend and Restart, you could increase benefits once you started them. If you reached your Full Retirement Age and were not yet 70, you could stop taking your retirement benefits and restart them any time until you are 70. When you start benefits again, you would receive an increase of 8% per year from the time you stopped until you reached 70. For example, if Mary and John are both 66 years old and John files and suspends to allow his benefit to grow at 8% per year until he reaches 70 years of age, Mary takes the spousal benefit with one-half of John’s benefit. John waits to take his benefit until age 70. His benefit is 132% of what would otherwise be his full retirement benefit.
- Restricted Applications by Spouses cannot be Filed. Also, effective April 29, 2016, individuals born in 1954 or later can no longer file a restricted application to allow their spouse to collect only a spousal benefit while letting their own retirement benefits rise by 8% a year up to 4 years, until age 70. Filing for spousal benefits will be “deemed” to trigger the individual’s own retirement benefit. SSA will pay only the amount that is about equal to the greater of the two benefits.
- Temporary Loopholes. (a)If you are at least 66, you can still “suspend and restart” until 4/29/16 so your spouse may be eligible to receive these benefits after the Act is effective. You will also be able to receive the delayed credits for up to 4 years; (b) If you are at least 62 by the end of this year, you will not be subject to the expanded deeming rules. So, if you filed for your own benefits, your spouse can still file a restricted application for just spousal benefits, provided your spouse is 62 or over by 12/31/15; and (c)“Deeming” will not apply to a surviving spouse, who can still claim a survivor’s benefit while deferring individual retirement benefits, assuming the survivor has not already filed for individual retirement benefits.
- Once the New Rules are in Effect. After April 29, 2016, if you suspend your benefit you cannot claim benefits based upon anyone else’s earnings record and no one can claim benefits based on your record. This will terminate your right to suspend benefits and later claim a retroactive payment equal to all of your suspended benefits. If you already have suspended benefits, you can still get retroactive payments for up to four years (less 1 day). If you do not claim a retroactive payment, you can still earn delayed retirement credits for up to 4 years.
According to the AARP, these changes will apply entirely to future beneficiaries, so those near filing time should consult with their accountants and attorneys to determine the correct approach for them.