Changes to Social Security Claiming Options

On November 2, President Obama signed a two-year budget deal that was approved by congress on a bipartisan basis.  It eliminates the possibility of a government shutdown, keeps the Social Security disability fund solvent and reduces premium hikes for Medicare Part B beneficiaries.  These features caused it to earn the support of AARP and the National Committee to Preserve Social Security despite the fact that it also eliminates two popular social security claiming strategies – file and suspend and restricted application.  It’s easy to get these two strategies confused since they work together.  In short, file and suspend enables restricted application.

Here’s how file and suspend works.  It’s really a two-step process.  First, someone (for clarity, assume it’s the husband) who has reached at least the full retirement age, files for his benefits which establishes a “date for filing.”  This enables his wife (or dependent children) to receive benefits based in his work history (if they file a restricted application).  Second, the husband can then (optionally) suspend his benefits if he wishes to have them grow at 8% per year up to age 70.  The new legislation allows people who have reached the full retirement age to still use file and suspend for six months.

After that, the restricted application can come into play.  If his wife has also reached the full retirement age and she has not previously filed for benefits, she can file for a spousal benefit based on her husband’s work history.  Without the restricted application, she would receive benefits based on her work history.  The new legislation allows people who reach age 62 by the end of 2015 to still use a restricted application.

Still have questions?  This all boils down to the following, if you suspend your Social Security payments, your spouse or dependent children will no longer receive benefits until you restart your payments.  Also, if you’ve already employed either of these strategies, don’t worry, the change is not retroactive.

You can see that there’s a limited amount of time to use this popular strategy.  We invite you to visit our website or give us a call at 970.419.8212 so that we can discuss your situation in a no-charge, no-obligation initial meeting.

This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products.  Please consult your tax or investment advisor for specific advice.