Bipartisan Budget Act of 2015 -  How does this effect your clients preparing to draw Social Security?

​On November 2nd, 2015 President Obama signed the Bipartisan Act of 2015. This budget will provide funding for the 2017 fiscal year. Numerous changes were made to Social Security as part of this budget, and will go into effect May 1st, 2016. These changes will affect your clients who will be approaching retirement age and are looking to draw on their Social Security benefits.

What are the changes?

The biggest changes were the elimination of the ‘File and Suspend’ and ‘File and Restrict’ strategies. These changes will go into effect May 1, 2016. However, if your clients are at full retirement age under the current law, they can still file and suspend their Social Security benefits.

‘File and Suspend’

This allows a lower-earning spouse to receive a higher benefit based on their spouse’s work history. If your client chooses to suspend their benefits (which increase 8%/year until age 70), they will still be able to take advantage of delayed retirement credits, because they are not yet receiving their Social Security benefits.
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‘File and Restrict’

This strategy allows clients at the full retirement age (normally age 66) to restrict their application to spousal benefits. Typically one worker claims benefits, and the spouse only claims spousal benefits to increase their total payment from Social Security. The spouse can then claim their own higher benefit at a later date, age 70 for maximum benefits . By doing this, they are not receiving their own benefits, allowing them to continue to grow.

Other Important Factors

If your clients are 66, or turning age 66 before May 1, 2016, they will still be able to file and suspend. Alternatively, if your clients already have one of these strategies in place, they will not be impacted by this new law. Your clients who are age 62 or older by December 21st, 2015 will only be able to claim spousal benefits when they turn age 66, and then switch to their own benefits at age 70. This provides greater benefits than each claiming benefits only from their own account.

By Carolyn Portanova