In their recent last minute budget bill, Congress included a change to Social Security. If you are one of the thousands of people that planned to use the “file and suspend” strategy for your retirement planning, you may need to reevaluate. This strategy works by having the higher earning spouse file for Social Security benefits at their full retirement age, which varies depending on the year of your birth; currently the age is 66. Once the eligible party files, they immediately suspend the filing and allow the benefit to grow as though they were not taking the benefit at all. Their benefit will grow until the beneficiary reaches age 70, or elects to begin taking their benefits. At that time the spouse with the lower-earning history would be able to claim spousal benefits at their full retirement age and then later shift to their own full benefit, if it is larger.
Those that are already age 66 or will be by April 30, 2016, still have the right to file and suspend under the old rules. Those who file and suspend by the deadline retain the right to request a lump sum payout of suspended benefits any time up to the age of 70, rather than earning delayed benefits.
Anyone who is 62 or older by December 31, 2015 is still permitted to claim just spousal benefits when they turn 66, as long as their spouses have either claimed Social Security or have filed and suspended benefits by the April 30, 2016 deadline. This allows the one collecting spousal benefits to collect half their spouse’s full retirement age benefits, and allow their own to grow until age 70, when they will be worth 132% of their full retirement amount.
If someone turns 62 after December 31, 2015, they will lose their rights to claim spousal benefits only. If you miss this cutoff, it means that you will be subject to deeming rules through age 70. If you are entitled to both spousal benefits and your own benefits, you will be forced to file for both at the same time and will be paid the higher amount. For many this means that the spousal benefit will never be paid.
Surviving spouses will retain rights to choose when to claim their benefits, when they have also earned their own retirement benefit. They will be able to choose the spousal benefit first and then to their own later if it results in a larger benefit.
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