In October, President Obama and the US Congress passed the Bipartisan Budget Act of 2015. Included in that act was a clause that eliminated two popular Social Security claiming strategies: File-and-Suspend and Restricted Application.
File-and-Suspend: A strategy where a person, who is at least full retirement age, files for social security benefits, but then immediately requests to suspend those benefits. This allows his/her spouse to take a spousal benefit on the filer’s record, while the filer’s benefits are delayed and continue to grow.
Restricted Application: A strategy where a person, who is at least full retirement age, files for spousal social security benefits and delays his/her own benefit so it continues to grow. This allows the filer to receive some benefit now (the spousal benefit), and a larger benefit later.
Delaying your benefit pays off big. When you delay your benefit you earn delayed retirement credits, which equate to an annual 8% increase in benefits.
Those born before April 30, 1950 were grandfathered in to the old rules and may continue to use File and Suspend and Restricted Application strategies while delaying their credits. Please note, if you were born before April 30, 1950 and you wish to implement the File and Suspend Strategy, you must submit your application before April 29, 2016.
Those born after April 30, 1950 or on or before January 1, 1954 (age 62 in 2015) may only use the Restricted Application strategy. If your spouse is receiving benefits and you have reached full retirement age, you may apply for a spousal benefit, while allowing your own benefit to accrue Delayed Retirement Credits.
For those born after January 1, 1954, neither strategy is available. However, you may still choose to delay taking your benefits until age 70. By doing so, you stand to increase your future benefits by 32%.
Please note that if you are already drawing Social Security, or if you have already set up File and Suspend, the new laws do not affect you.
Summary of Available Strategies
|Age||Can Participate||Cannot Participate|
|66 by 04/30/2016||File & Suspend /Restricted Application|
|62 by January 1, 2016||Restricted Application||File & Suspend|
|62 by January 2, 2016||File & Suspend /Restricted Application|
There are many factors to consider when determining when to start taking Social Security. We recommend that you meet with your financial advisor for guidance to help you with that decision. And if you were born before April 30, 1950, please remember the April 29, 2016 deadline.