By Emily Brandon – US News & World Report
The Bipartisan Budget Act of 2015 makes significant changes to the Social Security program that impact the payments you will qualify for in retirement. The law eliminates several Social Security claiming strategies, which the bill refers to as “unintended loopholes”, that some married couples and families used to increase their benefits. Here’s how the Social Security rules have changed:
No more double claiming. Some dual-earner married couples who are 66 or older have been claiming Social Security benefits twice. They first collect spousal payments worth half of the higher earner’s benefit amount, and then later switch to payments based on their own work record, which are then higher due to delayed claiming. People who turn 62 in 2016 or later will no longer be able to claim these two types of payments at different times. “If you are not 62 by the end of this calendar year you can’t do the restricted application anymore,” says Tim Steffen, a certified financial planner and director of financial planning at Robert W. Baird & Co. Instead, you can claim a spousal payment or one based on your own work record, typically whichever is higher. A 2009 analysis by the Center for Retirement Research at Boston College found that if every eligible person used this strategy, it would cost the Social Security program about $10 billion a year.
Dependents can’t claim payments if you suspend your payments. In the past, you could claim Social Security benefits and immediately suspend them, which allowed a spouse and sometimes dependent children to claim payments based on your work record while you continue to accrue delayed retirement credits that allow you to claim larger payments later on in retirement. The new legislation changes the rules so that if you suspend your Social Security payments, your spouse or children who receive payments based on your work record will no longer receive them until you start your payments again. This rule change applies to benefit suspensions submitted beginning in May 2016. “If your plan has been to do it all along, you have a six-month window starting [November 2] in which to do it,” Steffen says. “If you wait past that the ability to claim and suspend and have a spouse collect benefits will be gone.”
Retirees continue to be able to suspend their payments, and when they resume them they will be paid going forward at a higher rate, due to the accumulation of delayed retirement credits. “You can still suspend your benefit and start it up again at 70 at a different level,” says Laurence Kotlikoff, an economics professor at Boston University and co-author of “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” The Center for Retirement Research at Boston College estimates that couples using the claim and suspend strategy cost the program about half a billion dollars per year.
Take advantage of the claiming options you still have. Married individuals are still eligible to claim payments worth up to 50 percent of the higher earning spouse’s benefit, if that amount is higher than payments based on the lower earning spouse’s work record. And widows and widowers inherit their spouse’s benefit payment when it is higher than their existing benefit. All workers also have the option to increase their monthly Social Security payments by delaying claiming them up until age 70. “Most of the gain is really from delaying,” Kotlikoff says. “The real advantage is still there, which is being patient.”