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Social Security Changes
Happy 2016! We hope you are off to a great start for the year. In this Virtus View, we would like to highlight time-sensitive changes to Social Security that were included in the Bipartisan Budget Act of 2015 and how those changes may affect you.
No more Spousal File / Suspend Strategy. In the past, you could claim benefits on your own record and immediately suspend those benefits so that your spouse could start receiving their spousal benefit on your record while your benefits continue to accrue at 8% a year until age 70. Now, after the recent changes, if you suspend your benefits your spouse can no longer receive payments on your record. This applies to benefit suspensions starting in May, 2016.
No more Spousal Restricted Claim “Double Dip” Strategy. In the past, if you were a dual-earner married couple, you could potentially claim benefits on your spouse’s record as well as your own. With this strategy, you claim your spousal benefit on your spouse’s record while allowing your benefits to continue to accrue on your record. This could be implemented in conjunction with the File / Suspend Strategy above or on its own, depending on the situation. Now, you can only claim benefits on one record, either your spouse’s or your own, typically whichever is higher. This applies if you turn 62 in 2016 or later.
How does this affect you?
If you are currently using either one of these strategies, you are not affected and can continue “as is”. If you were planning on using these strategies in the future, you have limited time and options to take advantage of them (see examples below).
- File / Suspend – If you are a single-earner married couple AND you and your spouse are both Full Retirement Age (around 66), you have until May, 2016 to file / suspend the benefits on the earner so that the spouse can start receiving their spousal benefit while the earner’s benefit continues to grow. This strategy may be available if you are 66 or older within the first 6 months after the law is enacted.
- Double Dip – If you are a dual-earner married couple AND your spouse is already receiving social security benefits AND you are Full Retirement Age (around 66), you can claim your spousal benefit on your spouse’s record while allowing your benefit to continue to accrue. This applies if you were born before 1/1/1954.
- Combination – If you are a dual-earner married couple AND you and your spouse are both Full Retirement Age (around 66) AND you want to “Double Dip” while allowing both of your benefits to accrue delayed retirement credits until 70, you have until May, 2016 to file / suspend / double dip, so that you can start receiving a spousal benefit while both benefits continue to earn delayed retirement credits. This strategy may be available if you are 66 or older within the first 6 months after the law is enacted.
As you can see, Social Security is surprisingly complicated, and planning is key. We can produce a detailed social security analysis for you to help ensure you are maximizing your benefits. If you need assistance with social security planning, our team of professionals at Virtus Wealth Management are here to help.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized advice.