NEW YEAR, NEW YOU Social Security Strategy

Recent budgetary legislation approved by Congress and signed by President Obama will result in major changes to the available Social Security claiming strategies. Section 831 (Closure of Unintended Loopholes) found in the Bipartisan Budget Act of 2015 has left many retirees and pre-retirees in a state of confusion and fear, so we will help make sense of these upcoming changes and address how they will impact retirement income planning.

Goodbye, File and Suspend

One claiming strategy that we’ve been recommending to many clients over recent years has been the “file and suspend” strategy, which has permitted one member of a married couple who has reached full retirement age to file for Social Security retirement benefits but also suspend those benefits. As it currently stands, the act of filing, even if immediately suspended, allows that person’s spouse to file for spousal benefits. By suspending, eligibility to earn the 8% per year delayed retirement credit until age 70 is maintained, too.

This strategy is the first victim of the recent legislation. Effective April 30, 2016, suspending benefits will also suspend the spouse’s ability to draw spousal benefits. Technically filing and suspending will still be allowed, but the advantage for spousal purposes is going away.

Farewell, Restricted Application

The new rules will also end the ability of anyone born in 1954 or later to file a restricted application. Doing so has allowed a person to claim spousal benefits only. When used in tandem with the file and suspend strategy, this often has resulted in a couple maximizing their lifetime benefits.

Instead of an applicant being able to choose between taking their own benefit or a spousal benefit, the Social Security Administration will now automatically pay the higher of the two benefits. What is also lost is the ability to earn the 8% delayed retirement credit each year while drawing spousal benefits since it will no longer be possible to pick between the two.

There is Still Time

If you haven’t already implemented one of these strategies, you may still have time depending on your age. Those who have already filed and suspended have nothing to worry about because they are being grandfathered. Also, anyone who will turn age 66 by April 30, 2016 will still be able to file and suspend anytime up until that date. Doing so will allow your spouse to file for spousal benefits as long as he or she is at least full retirement age. People younger than 66 by that date are the ones really losing out.

If you will turn age 62 by December 31, 2015, you will still be able to file a restricted application. This will preserve your opportunity to claim spousal benefits only, allowing you to switch to your own retirement benefit at age 70 if larger than your spousal benefit. Those who won’t be 62 by the end of 2015 are the ones losing this ability.

Update Your Financial Plan

Now is the time to do a financial plan in order to maximize your retirement income sources. Even if you’ve done a plan in the past, this represents a great opportunity to revisit your Social Security claiming strategy and develop a plan to bridge the possible income gap caused by this recent news.

Jonathan E. Stano, CFP® is the Director of Financial Planning at FinTrust Investment Advisors located at the Greenville, SC office. For more information, call 864-288-2849 or e-mail The information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. The material has been prepared for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results. Securities offered through FinTrust Brokerage Services, LLC.