The Social Security Jig Is Up!
Gary Klaben and John Dragstrem discuss important changes to Social Security you can’t afford to ignore
- New legislation will soon put an end to the popular “file and suspend” and “restricted application” strategies for maximizing your Social Security benefits.
- After April 30, 2016, you can still collect, delay and reap retirement credits. But the benefits to the spouses, once you suspend, will no longer exist.
- If you’re at least 66 and have not filed for Social Security benefits, you have about 5 more months to take advantage of the file-and-suspend feature within Social Security.
- Social Security Graphic
Gary: John Dragstrem of Wheaton Wealth Partners, which recently merged with our firm, joins me to talk about important changes to Social Security. As some of you know, on November 2, Congress passed, and the president signed, an important budget act that will close two popular loopholes used by savvy retirees to maximize their Social Security benefits. These loopholes will be eliminated as of April 30, 2016.
John: Correct, Gary. The two are (1) file and suspend and (2) restricted application. File and suspend allowed a person to file for his Social Security benefits and then immediately suspend them. Why would they do that? Because filing allows spouses and dependent children to start claiming their benefits off of the primary breadwinner’s record. And then the primary breadwinner could delay his or her retirement and earn delayed retirement credits through the Social Security system, increasing benefits by 8 percent per year.
John: That’s significant. That still exists–the ability to collect, delay, and reap the retirement credits. But the benefits to the spouses, once you suspend, will no longer exist after April 30, 2016.
John: The other component is what we call restricted application (or spousal-only benefit), and that allows the spouse to claim only his or her spouse’s benefits and hold off on claiming his or her own benefits. In certain circumstances, it made a lot of sense.
Gary: Who should be particularly aware of the April 30 deadline in 2016?
John: Excellent question. If you’re at least 66 and have not filed for Social Security benefits, there’s still time for you to claim this file-and-suspend feature within Social Security. That ends April 30, 2016.
Gary: So, what strategies should folks consider going forward?
John: As we mentioned earlier, you may still want to suspend your credits so you can earn delayed retirement credits. But in reality, Social Security is now so complex that you really want to consider both spouses’ incomes, their ages and other retirement benefits they may have. It’s very hard to make generalizations about what to do. I recommend that you sit down with your financial advisor and determine the best path to take.
Gary: So, as we’ve said in these blog posts in the past, it’s really important to make sure you plan this out, especially with this time frame over the next five months or so. This is really going to make a big difference during this window.
So until next time, enjoy.
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