Editor's Note: This article was originally published in November 2015. The links were updated in 2024.
The federal budget agreement that President Obama signed into law November 2, 2015, spells the end to two Social Security strategies that some spouses have traditionally used to maximize their benefit amounts. These strategies were worth tens of thousands of dollars over a lifetime for some couples.
The demise of these strategies come 2016 may require Social Security recipients either to take certain actions before the changes take effect, or to reconsider their retirement plans.
File and Suspend
According to Social Security Administration rules, the spouse of a worker cannot claim a spousal benefit unless the worker has applied for Social Security benefits.
As of 2015, a worker has the option to file for Social Security retirement benefits once they reach full retirement age and then can suspend those benefits. This strategy – commonly known as "File and Suspend" – allows the worker's spouse to begin receiving spousal benefits while the worker postpones receiving their own monthly retirement benefits.
The longer the worker delays retirement, the more delayed Social Security credits they will accumulate (up to age 70). This later results in a larger Social Security retirement check for the worker.
Under the new law, a spouse cannot begin receiving benefits until the worker is actually receiving benefits, too. Workers can still file and suspend, but spouses (or other dependents, including minor and disabled children) will not be able to receive benefits during the worker's suspension.
This law will take effect on April 30, 2016, though it does not affect workers who have already filed and suspended benefits. Workers who are at least 66 or will turn 66 before the effective date of the law may still file and suspend to trigger benefits for their spouse.
Claim Now, Claim More Later
The law also is set to change another rule that currently allows a spouse who files for Social Security retirement benefits at their full retirement age to choose whether to take spousal benefits or benefits on their own record. This strategy – commonly called deemed filing or "Claim Now, Claim More Later," – permits a higher-earning spouse to claim a spousal benefit at full retirement age. Then, when they reach age 70, the higher-earning spouse could claim the maximum amount of their own retirement benefit and stop receiving the spousal benefit.
If you are age 62 or older by the end of 2015, you will still be able to choose which of these benefits you want at your full retirement age.
Under the new law, when workers who are not 62 by the end of 2015 apply for spousal benefits, the Social Security Administration will assume it is also an application for benefits on the worker's record. The worker is eligible for the higher benefit, but they will no longer have the option to take just the spousal benefits and allow their own benefits to keep increasing until they reach 70 years of age.
Note that this new rule does not apply to survivor's benefits. A surviving spouse will still be able to choose to take survivor's benefits first and then switch to retirement benefits later if the latter is larger.
Contact a local elder law attorney or a financial advisor to determine whether you should take any action before the new rules become law in the spring of 2016.
For additional reading on this topic, please read the following articles:
Subscribe to the Knowledge Bank.
