STRATEGY 1: File & Suspend – Under File & Suspend the higher earning spouse upon reaching age 66 (Full Retirement Age) would file for benefits and then immediately suspend them, thus allowing the spouse to claim spousal benefits while the worker delayed taking their benefits until age 70 and earning delayed credits of 8% per year. The overall impact was that the spouse could receive ½ of the workers age 66 check and the worker would receive 132% of their age 66 check if they waited until 70 to start receiving benefits.
Changes – under the new law this option will no longer be available, however, anyone who is currently 66 or will be 66 by April 2016, 180 days after the law is signed, will still be able to use this strategy.
An unintended consequence of this law change is that it will affect all individuals receiving benefits on the workers record (spouse, minor children, spouse with minor children below age 15, parents). So if the worker wants to have these individuals continue to receive benefits they would not be able to suspend their own benefits.
This law also disallows the ability of the worker to File & Suspend and then take a lump sum benefit of checks missed since FRA. They can still claim anytime after FRA and they would receive delayed credits up until the date that they claimed and the monthly checks would commence.
STRATEGY 2: Claim Now – Claim More Later (Restricted Claiming Provision) – Under this option, the lower earning spouse files for their own benefits when the higher earning spouse turned 66 (FRA) thus allowing them the ability to claim spousal benefits for 4 years while delaying their own benefits until age 70.
Changes – under the new law this option will also no longer be available, however, anyone turning 62 years old prior to January 2nd, 2016 will still be able to use this strategy.
WIDOWS / WIDOWERS – From what we can tell at this time, survivorship benefits are not affected. Thus a widow / widower can receive survivorship benefits and still integrate those benefits with their own benefits.
DIVORCES – An unintended consequence of these law changes is that a divorcee who will not be 62 by January 1, 2016 won’t be able to claim spousal benefits while postponing their own benefits until age 70. This law could change so stay tuned!
SOCIAL SECURITY DISABILITY – prior to this law change, disability benefits were projected to be cut by 20% since the Disability Trust Fund was empty, or near empty, and Congress was not willing to take money from the Retirement Trust Fund to shore up the finances of the Disability Fund. Thus, Social Security Disability benefits will not be cut!
MEDICARE – prior to signing this law, Medicare Premiums for people turning 65 next year and starting Medicare, or people over 65 who had not yet started taking Social Security, would see a 52% increase from $104.90 to $159.00 per month. Under the new law the increase was limited to 15% or $123.00 per month.
Moving forward there are really 3 categories of Claimants that need to be addressed.
- Those people turning 66 within the next 6 months – The File & Suspend Option
- Those individuals who will be 62 by year end 2015 – The Claim Now – Claim More Later
- Those individuals who turn 62 after 2015 – The importance and value of waiting and earning delayed credits. NOTE: Even without the ability to claim spousal benefits while you wait until age 70, there is a 76% increase in benefits by waiting!!! Thus it is extremely important that if you are healthy and if longevity runs in the family, postponing until 70 is still a wise decision.