Social Security Benefit Changes

In November 2015, Congress signed into law the Bipartisan Budget Act that effectively brought an end to both legal and permissible claiming strategies inadvertently created under the 2000 Senior Citizens Freedom to Work Act. These claiming strategies, falling under the voluntary suspension rules, had become popular for married couples who were smart enough to figure out on their own or be advised to take advantage of. A report from the Center of Retirement Research estimated that SSA could potentially pay out $9.5B in additional benefits, with a slight skew towards married couples who both had a lifetime of above average earnings. New opposition from the White House and Congressional Democrats ignited a determination to close the loop hole thereby reducing future Social Security benefits paid out. While the File and Suspend claiming strategy was available until April 2016 to those who had turned age 66, for those who were born on or after May 2, 1950 but before Jan 1, 1954 [age 62+ in 2015] the Restricted Application remains an available benefit option. By using the Restricted Application, couples stand to benefit from a claiming strategy coined “claim some now, more later”.  As I work with clients, it has become apparent that not all couples who qualify for this claiming strategy stand to benefit economically from using it. However, for other couples who qualify, having a focus on survivorship needs, this option can offer a nice economic bonus as I discovered recently working with a couple. The decision of when to claim benefits is not a factor of a sum of payments, but rather varying cash needs and withdrawals from different sources over time. Having a retirement analysis prepared using specialized software can show how various options play out. Interestingly enough, the group who can still benefit from the loopholes are widows…widows of spouses and divorced ex-spouses. Many are not aware of these claiming strategies, nor the difference in benefits levels. Situations like this reinforce the benefit derived from working with a CFP® who has a strong working knowledgeable of Social Security benefits.

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