The Bipartisan Budget Act of 2015, which the President signed on November 2, 2015, contains multiple changes to payment strategies that many people utilized in determining when and how they would collect their Social Security retirement benefits. These changes eliminate "unintended loopholes" which ultimately financially benefited many claimants, and will particularly affect those who turn 62 years of age after 2015.
The first major change will be the elimination of double claiming. Many married couples—aged 66 years or older—have had the option of first claiming spousal payments (if the spouse was a higher earner) and then are able to switch to their own benefit amounts, which are now higher because they delayed in claiming. The longer one waits to claim his or her Social Security benefits, the higher monthly benefit amount will be.
For example, a wife may file for spousal benefit at age 62. When she turns 70, she then switches to her own retirement benefit, which has increased significantly from what her benefit amount would have been if she had claimed it at age 62. However, with the new changes, a person will need to choose one option or the other and will not be able to make changes to that choice later on. According to one analysis, there is a potential savings to the Social Security fund of $10 billion annually by eliminating this option.
Currently, if a person claims his or her Social Security benefit, but then suspends it, any dependent entitled to benefits would still receive those payments. Yet if the person is still working and wishes to continue to accrue retirement benefits, as well as receive the delayed benefit amount which will be significantly higher, he or she utilizes the file and suspend option, but his or her spouse continues to receive a monthly benefit check.
The Act removes that option. If a person suspends his or her benefits, dependent payments also stop and will not begin again until the benefit is activated again. This change will become effective in May of this year.
Changes to benefit and tax laws can be confusing to keep track of and understand how they affect your retirement plans, which is why it is important to consult with an experienced DuPage County estate planning attorney. Please call Stock, Carlson, Oldfield & McGrath LLC at 630-665-2500 to schedule your consultation today.