Nov 20, 2015

Spouses lose two Social Security-maximing strategies

Some say the federal budget passed in October closes Social Security loopholes that needed closing. Others say it cuts off a necessary financial lifeline for married seniors who rely on Social Security benefits to get by. Either way, the bottom line is that Social Security is now eliminating two techniques that in the past allowed married couples to leverage their benefits: 

After April 30, 2016 "File and Suspend" will no longer be available. Since the technique will soon be defunct, l will provide just a brief description of how it works (or worked): The higher wage earner, Spouse A, files for benefits upon reaching full retirement age. That allows the other spouse, Spouse B, to begin collecting spousal benefits based on A's earnings history. Spouse A then suspends benefits payments. The net effect: both spouses delay their retirement benefits so their earnings can continue to grow, allowing them to collect a larger benefit upon reaching age 70. You can read more about file and suspend here.

Note: Effective April 30, 2016, workers can still file and suspend, but their spouses cannot collect spousal benefits during the suspension period.

Restricted applications are eliminated for some, effective January 1, 2016. Right now, a married person at full retirement age can apply for spousal benefits, and then, at age 70, switch over to receiving his/her own benefits. This allows the person to take advantage of delayed retirement credits on his/her own earnings history. But effective January 1, 2016, the Social Security Administration will no longer permit restricted applications if the married person is less than 62 years old by the end of 2015. However, that individual can file a restricted application at any time after Janary 1, 2016, provided he/she is 62 or over before January 1, 2016. 

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