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Be Aware of Rule Changes When Claiming Social Security

Menashe Morley Group

Be Aware of Rule Changes When Claiming Social Security

Posted on September 10, 2016

On November 2, 2015, the Bipartisan Budget Act was signed into law. Included in the fine print were provisions that put an end to two Social Security claiming strategies that many married couples had used to maximize their retirement income. Those changes were effective April 29, 2016. The changes apply to those who are married or divorced, as well as to people with dependents who are eligible for benefits based on their records. Many will therefore need to reconsider how they think about Social Security.

The most well-known of the claiming strategies that was taken off the table was the “file and suspend” strategy, useful for couples with widely different earnings records. It allowed one spouse (usually the higher earner—let’s say it is the wife) to claim and immediately suspend her Social Security benefit, while her husband filed for spousal benefits based on his wife’s higher income. Her suspended benefit, meanwhile, continued to grow in value by 8% a year, until she decided to file for Social Security benefits or reached age 70.

The second strategy that was phased out, the “restricted application,” was known as the “claim twice” strategy. It allowed a married person of full retirement age—let’s say it is the husband this time—to file for a spousal benefit while deferring his own benefit and letting it grow until he was ready to claim it. Both strategies helped maximize Social Security income over spouses’ lifetimes.

Even with the changes, a married couple will receive at least as much and often substantially more than they would as two single individuals. The spousal and survivor’s benefits allow one spouse to claim benefits based on the higher-earning spouse’s record.

The spousal benefit is not being phased out — it’s the timing of when a married individual can apply for that benefit that has changed.

Under the revised rules, with some exceptions, a person can apply for a spousal benefit only if his or her spouse has also filed for benefits. Depending on the situation, it may make sense for the higher earner to consider waiting at least until full retirement age to claim benefits. The lower-earning spouse can claim Social Security at age 62, and then request a spousal adjustment once the other spouse files for Social Security, if the spousal benefit would have been higher than their retirement benefit at full retirement age. However, if the spouses have similar earnings, the higher earner could wait to claim benefits until age 70, while the lower earner could claim benefits as soon as he or she reaches the full retirement age of 66.

If you have any questions, talk with your financial advisor or tax advisor. You may also want to consult with an attorney who specializes in elder law.

For more information, contact The Menashe Morley Group in the Rancho Santa Fe office at 858-381-8113. The Menashe Morley Group, serving the community for over 30 years: David Menashe is a Senior Vice President and Wealth Management Advisor, Bruce Morley CRPC ® is a First Vice President and Wealth Management Advisor and John Naviaux CPWA ® is a Vice President and Wealth Management Advisor for Merrill Lynch, Pierce, Fenner & Smith Incorporated. Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation. Investment products are not FDIC insured, are not bank guaranteed, and may lose value. MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation.


Menashe Morley Group
Menashe Morley Group

Photo Caption: Menashe Morley Group

Photo Credit: Photo by Jennifer Nelson


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