So if you’re reading this, chances are you googled Social Security and found us. More specifically, you were interested in the rule change that took place as a result of the budget deal that passed back in November of last year. More than likely, you are wondering “Am I affected and what does the rule change mean for me?” Well, let’s talk a bit through these changes shall we?
As of April 30, 2016, individual workers of all ages can no longer use the file and suspend strategy to begin a spousal benefit for the other spouse or for qualifying dependent. However, if a worker files and suspends prior to April 30th, they would be grandfathered in with no change. Furthermore, if a worker has not started his/her own benefit, is 66 or older now, or will turn 66 before April 30th, that worker could file and suspend to begin a spousal or dependent benefit if the filing is completed by April 30th. If one has not guessed by this point, April 30th is the all magical date we need to be aware of when everything changes. Now if done, the workers own benefit would then grow by delayed retirement credit until age 70. Wait too long and kiss this strategy goodbye. Bottom line, if you’re 66 by the deadline, get it done. If you are not 66 by then, well…you’re just too young for this ride.
But there’s good news! Regarding the file and restrict strategy, if individuals who are 62 or older in 2015 they can still take advantage of this restrictive filing strategy. But here’s the real bad news. File restricted is no longer an option for those younger than 62 in 2015. Individuals under 62, both strategies are gone. No standing on your tippy toes to reach the measuring stick on this one. This is supposed to save the social security system hundreds of billions of dollar so cheer up you young bucks out there. Despite what you’ve heard, looks like you’ll get your social security after all. Now don’t spend it all in one place, you hear?
But to clarify any confusion of how this change looks, here’s an example:
Age 66 (FRA) in June 2016
PIA = 2000 / month
Age 66 (FRA) in July 2016
PIA = 1800 / month
Previously, Spouse A would file and suspend, deferring own benefit until 70, allowing Spouse B to file and restrict and then collect 1000 spousal benefit and switch to own benefit at age 70 at 132% of PIA, or vice versa.
NOW, Spouse A would have to file and start collecting own benefit so that Spouse B could then file and restrict to then collect 1000 spousal benefit and switch to own benefit at age 70 at 132% of PIA, or vice versa.