Married retirees will no longer be able to “double dip” when claiming Social Security benefits due to the Bipartisan Budget Act of 2015. Included in that bill signed into law on November 2, 2015 was a provision that eliminated certain strategies that have historically been used by individuals to maximize their Social Security retirement benefits. The act takes effect May 2nd, and consequently many individuals are now rethinking how they plan for their retirement income.
William Moran, senior financial advisor and senior vice president of wealth management at Merrill Lynch shared with FOXBusiness.com what you need to know about the upcoming changes in Social Security and the effect they can have on your retirement planning.
Boomer: What are the changes to the “file and suspend” or “claim twice” strategies included in the Bipartisan Budget Act of 2015.
Moran: This legislation curtails two techniques known as “file and suspend” and “filing a restricted application” that are used to implement various claiming strategies.
Under the new law, it will no longer be permissible to file and suspend benefits while allowing a spouse or minor dependent child to claim benefits on one’s earnings. It will still be possible to suspend benefits and earn delayed retirement credits. However, with the new changes, once you suspend your benefits, no other benefits based on your earnings record will be paid to spouses, dependent children or any other individual. As the filer, you will have to collect your own benefits in order for your spouse, dependent children or any other individual to receive spousal or dependent benefits on your record.
If you were born after 1953, you will no longer be allowed to claim your spousal benefit while deferring and receiving delayed retirement credits on your own benefit. Instead, you will be required to file simultaneously for both your spousal benefits and your own benefit. You will receive an amount equal to the greater of the two benefits. Certain individuals born before 1954 remain eligible to file restricted applications.
Boomer: Who do the changes apply to and what considerations should be taken for those unable to take advantage of the two phased-out plans?
Moran: Individuals who have already implemented the claiming strategies are not impacted. The new rules primarily impact individuals who are eligible for, but have yet to file for their Social Security benefits and those that have already filed but may wish to suspend their benefits.
Boomer: What strategies should be taken to maximize social security income and factors considered when deciding when and how to claim benefits?