New
Social
Security
Rules
By Daniel T. Newquist,
CFP®, AIF®
Dan Newquist, CFP®, AIF®,
Principal & Senior Wealth
Advisor with RNP Advisory
Services, Inc., a registered
investment advisor, Morgan
Hill. He can be reached at
408-779-0699 or dnewquist@
RNPadvisory.com. Securities
offered through Foothill
Securities, Inc., member
FINRA/SIPC, an unaffiliated
company.
W
hen 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
people who expected to use those strategies
to boost their retirement income. Below are
highlights if you are wondering how the new
rules might affect you.
What’s changing? These strategies, known
as “file and suspend” and “restricted
application for a spousal benefit,” have often
been used to increase cumulative Social
Security income for married couples. The
provision of the budget bill called “Closure of
Unintended Loopholes” has eliminated these
strategies for most future retirees, but you
may still have time to take advantage of them,
depending on your age.
File and suspend: Under the old rules, an
individual who had reached full retirement age
could file for retired worker benefits in order
to allow a spouse or dependent child to file for
a spousal or dependent benefit. The individual
could then suspend receiving their own retired
worker benefit in order to accrue delayed
retirement credits and claim an increased
worker benefit at a later date, up to age 70.
For some couples and families, this strategy
increased their total lifetime combined benefit.
Under the new rules, effective for
suspension requests submitted on or after
April 30, 2016 (or later if the Social Security
Administration provides additional guidance),
the worker can file and suspend and accrue
delayed retirement credits, but no one can
collect benefits on the worker’s earnings record
during the suspension period, effectively
ending the file-and-suspend strategy for
couples and families.
Restricted application: Under the old
rules, a married individual who had reached
full retirement age could file a “restricted
application” for spousal benefits after the other
spouse had filed for retired worker benefits.
This allowed the individual to collect spousal
benefits while delaying filing for his or her
own benefit, in order to accrue delayed
retirement credits.
Under the new rules, an individual born in
1954 or later who files a benefit application
will be deemed to have filed for both worker
and spousal benefits, and will receive whichever
benefit is higher. He or she will no longer be able
to file only for spousal benefits.
The bottom line. A limited window still exists
to take advantage of these two claiming strategies.
If you’re currently at least age 66 or will be by
April 30, 2016, you may be able to use the file-
and-suspend strategy to allow your eligible spouse
or dependent child to file for benefits, while also
increasing your future benefit. To file a restricted
application and claim only spousal benefits at
age 66, you must be at least age 62 by the end
of December 2015. At the time you file, your
spouse must have already claimed Social Security
retirement benefits or filed and suspended
benefits before the effective date of the new rules.
If you’re already using one of these, you will
not be affected by the new rules. You have already
met the age requirements.
Basic options for claiming Social Security
remain unchanged. Currently, the earliest age
at which you can receive Social Security retire-
ment 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, including other sources of retirement
income, whether you plan to continue working,
how many years you expect to spend in retire-
ment, and your income tax situation.
This article is intended for educational purposes only. It is not intended as investment
advice. Always consult your fi nancial or tax-planning professional for guidance with
respect to your specifi c situation.
GILROY • MORGAN HILL • SAN MARTIN
JANUARY/FEBRUARY 2016
gmhtoday.com
75