3 Big Social Security Changes: What Do They Mean for You?

A few big new Social Security changes will begin being implemented on May 1, 2016 Most of these rules aim to eliminate the ability to manipulate benefits so that you can continue to delay the official start of your own Social Security payments — thereby maximizing your monthly benefit amount.  The longer you delay starting your own benefits, the higher your monthly Social  Security checks will be. You may still be eligible to squeak in and take advantage of some of these strategies, read carefully to see if you need to do anything by the end of April, 2016.

Changes to the File and Suspend Strategy

The “file and suspend” strategy has enabled married couples to maximize their combined benefits. Under the old rules, one spouse could file for Social Security, then suspend the benefits but have the other spouse claim a restricted application for a spousal benefit.   The spouse who filed and suspended could wait to start benefits at their maximum retirement age and see their ultimate benefit amount grow at 8 percent a year. The file and suspend strategy will no  longer be available after May 1, 2016.  Your spouse will still be able to get spousal benefits, but only if you have filed and are actually receiving benefits yourself. The elimination of file and suspend options will also impact people with dependent children.  You will no longer be able to file and suspend your own benefits, but collect child benefits.  If you want to get the child benefit, you will need to start collecting benefits. If You  Are (or Will Be) 66 by April 29, 2016, Then Pay Attention!  If you are interested in the file and suspend strategy and you are 66 (or will be 66 by  April 30, 2016), then you have until April 29 to file and suspend.

Changes to “Restricted Applications”

“Restricted applications” enabled people who were between their full retirement age and age 70 to pick and choose and switch which benefit they received.  People with restricted applications could claim spousal benefits while deferring their own benefits,  letting their own benefit amounts grow.  They could then switch from the spousal benefit to their own (presumably larger) benefit at their maximum retirement age. After May 1, restricted applications will no longer be available.  Now, when you file for Social Security, you will be under the “deemed filing” rule.  This will apply to all people who file after age 62.  The deemed filing rule means that you can no longer switch the benefit you receive.  You will only be able to receive the larger of either the spousal benefit or your own benefit. If You Are (or will be) 62 By the End of 2016, Then Pay  Attention:  If you are interested in the restricted application rules and are or will be 62 by the end of 2016, then you can still take advantage of the old rules.

Changes for Retroactively Claiming Suspended Benefits

It used to be that you could file for Social Security, suspend your benefits and then — at some point in the future — you could request the payment of the sum total of all payments dating back to your original filing date.  (The sum total would be calculated based on the benefits you would have received at the original filing date — a lower monthly amount than you could receive at the future date.) This strategy offered flexibility — if you needed a lump sum of cash, you could access it.  Or, you could  just start a monthly benefit — at a higher amount whenever you decided to activate your Social Security. After May 1, the ability to receive this lump sum of historic benefits will no longer be available at all. If You Are 66 or Older:  You have until April 29, 2016 to request that your benefits be suspended.  You then have until age 70 to ask that any or all benefits that had been withheld be repaid in a lump sum.

Confused?  Contact Your Social Security Office

These rules are confusing.  If you have any doubts file and suspend or restricted applications, you should probably contact the Social Security Administration directly.  Social Security phone numbers, offices and online resources are available.

Are There Any Benefits to the New Social Security Claiming Rules?

The new rules give you fewer options for maximizing your overall Social Security benefits.  However, they do make it simpler to figure out what to do. The new rules also put the focus back on deciding when to start Social Security.  To figure out the best time for you to start Social Security, you might want to use a Social Security calculator. In general, the best time to start will usually be as late as possible. Unless you are scrambling to take advantage of the old file and suspend rules, you can usually maximize your Social Security benefits by delaying the start of those benefits.  A person who starts benefits at age 62 will receive far less a month than someone waiting to start until age 70.

Are These Social Security Changes a Big Deal?

Yes and no. The loss of these benefits mean that a few households will receive less money overall from Social Security.  And, everyone will have fewer choices. However, Social Security is only one part of your overall retirement plan.  And these Social Security strategies were only a small part of your lifetime Social Security earnings. A good retirement plan has many different pieces and parts.  Your savings, pensions, earnings, spending, home equity, investment strategies, health and a lot of other things both within and outside of your control will have a greater impact on your retirement security than these Social Security strategies. It is important that you harness control over all of these pieces and parts.  The best retirement calculators can do that for you.  The Boldin retirement calculator.  It was recently voted the “Best of the Web for Retirement Planning” by the American Association of Individual Investors (AAII).  Get started and assess and improve your retirement plan right now.