5 TIPS TO NEW SOCIAL SECURITY LAW
The Bipartisan Budget Act of 2015 made some significant changes to Social Security law. The new laws do away with some lucrative claiming strategies. You may still be eligible for these additional funds, but if you are, you need to act quickly.
- If you will be 66 or older on or before April 30th, 2016, you must file an application with Social Security to participate in the File and Suspend strategy.
- When you file an application, your spouse becomes eligible for spousal support. If you do not file, he or she cannot collect those funds. Spousal support is 50% of the primary wage earners benefit amount and can be as much as $63,000 over those four years.
- When you suspend payment, your monthly payment amount will increase 8% per year until age 70. This provides you with the maximum payment amount you can receive for the rest of your life.
- If your spouse has waited until Full Retirement Age to apply for spousal benefits, benefits on his or her own record will continue to increase 8% per year until age 70.
- The Bulk Payment option will no longer be available. Previously if you suspended your payments, you could receive back payment of any monies you missed.
Why the change? The File and Suspend strategy was an inadvertent consequence of a change in law in the year 2000. It was never intended to allow those additional funds, but clever financial planners caught on and popularized the strategy. The change in law will return the application process to its intended simpler version.
Social Security feels that collecting spousal support when you have earned enough on your own record to collect benefits is double dipping. You are collecting payments on your spouse’s record while your own benefits increase 8% each year. You will profit from that increase as long as you live.
The new law allows you to do one or the other. If you file for spousal support and are eligible for benefits on your own record, you will receive the higher of the two permanently, and your benefit will not increase as you age. If you wait until age 70 to collect, you will receive the 8% increase per year but will be ineligible for spousal support.
Who Needs To Take Action?
Anyone who will be 66 or over on or before April 30th, 2016 and has not filed for Social Security benefits.
If you have not filed, you can take these actions:
- File online. It is too late to schedule the required interview to suspend your benefits. You can file your application online and indicate your intention to suspend benefits on the Remarks tab. Make sure your statement is clear.
- Go to your local Social Security Office. Have all the required information and paperwork you need to file your application. You may have to wait, but you can file and suspend with the help of an agent.
Who Does Not Need To Do Anything?
- If you are currently collecting benefits, your payments will continue as scheduled.
- If you have already Filed and Suspended benefits, you do not have to do anything.
- If you will not be 66 years old on or before April 30th 2016, you do not have to do anything, but you will be subject to the law change going forward.
Why Should I File? I Don’t Plan On Collecting Until I’m 70.
There is no downside to applying for and suspending benefits, but there could be serious financial consequences if you do not. You will be disallowing your current or future spouse from collecting spousal support, and you may lose the option of collecting a bulk payment, which could be beneficial if you have a financial setback or develop a severe illness.
If you or someone you know will be 66 by the end of the month, I encourage you to take advantage of these options. You are the lucky ones—the last retirees who will be able to receive these benefits. Our financial world seems precarious at the moment. It’s in your best interest to set yourself up for the best possible future.