When Congress unexpectedly eliminated two Social Security claiming strategies as part of the Bipartisan Budget Act of 2015, retirement planning got a little more complicated for some people. Here are some questions and answers that could help if you are wondering how the new rules might affect you.
1. Why did Congress act now?
Both the file-and-suspend and the restricted application strategies were made possible by the Senior Citizens Freedom to Work Act of 2000. Part of this Act's original intent was to enable individuals to change their minds in the event they determined that they wanted to work longer but were already receiving Social Security retirement benefits. However, this opened up some claiming strategies that, while legal, went beyond the original intent of the legislation. Congress used the budget bill to close these loopholes in order to save money and slightly reduce the long-range actuarial deficit faced by the Social Security trust funds.
2. What if you're already using one of these strategies?
If you are already using the file-and-suspend or the restricted application strategy, you will not be affected by the new rules. You have already met the age requirements.
3. How are benefits for surviving spouses affected?
Rules affecting surviving spouses have not changed. If you are eligible for both a survivor benefit and a retirement benefit based on your own earnings record, you can still opt to receive one benefit first, then switch to the other higher benefit later.
4. What planning opportunities still exist?
Even if you can no longer take advantage of the file-and-suspend and restricted application strategies, you may still benefit from considering your Social Security filing options. The age when you begin receiving Social Security benefits can significantly affect your retirement income and the income available to your survivors after your death.
5. Have basic options for claiming Social Security changed?
No. Currently, the earliest age at which you can receive Social Security retirement benefits is 62, but if you choose to take benefits before your full retirement age (66 to 67, depending on the year you were born), your benefit will be permanently reduced by as much as 30%. On the other hand, if you delay receiving Social Security benefits past your full retirement age, you'll receive delayed retirement credits, which will increase your benefit by 8% for each year you delay, up to age 70.
Determining when to file for Social Security benefits is one of the biggest financial decisions you'll need to make as you approach retirement. There's no "one-size-fits-all" answer--it's an individual decision that must be based on many factors. It's especially complicated when you're married because you and your spouse will need to plan together, taking into account the Social Security benefits you each may be entitled to, including survivor benefits.
Although some claiming options are going away, plenty of planning opportunities remain, and you may benefit from taking the time to make an informed decision about when to file for Social Security.
If you sign up for a “My Social Security” account at the Social Security website, you can view your Social Security Statement online. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivors, and disability benefits, along with other information about Social Security that will be very useful when planning for retirement. If you're not registered for an online account and are not yet receiving benefits, you'll receive a statement in the mail every five years, from age 25 to age 60, and then annually thereafter.
If this blog has got you thinking about your own situation, get in touch with my office ([email protected]).
The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.