The recent budget deal reached by Congress and President Obama will eliminate two popular strategies used by married couples to maximize Social Security benefits.
Maximize Retirement Benefit While Still Collecting Spousal Benefits
Currently a spouse who has reached full retirement age (66 for those born between 1943 and 1954) and who has earned sufficient work credits to qualify for their own retirement benefit can elect to receive only a spousal benefit. The spousal benefit is worth half of their mate's full retirement age benefit amount. Delaying their own retirement benefit allows it to increase at a rate of 8% per year up to age 70. Upon attaining age 70, the individual would discontinue the spousal benefit and switch to their own increased retirement benefit. This strategy permits an individual to maximize their retirement benefit while still collecting a spousal benefit between the ages of 66 and 70. However, under the new Social Security rules included in the Bipartisan Budget Act of 2015, the ability to temporarily claim just spousal benefits is being phased out. By the end of 2015, married individuals will no longer be able to elect only spousal benefits while delaying their own retirement benefit. When a married person files a claim for Social Security, they will be entitled only to their own retirement benefit.
"File and Suspend" Subject to New Rules
Another major rule change involves the strategy known as “file and suspend.” This strategy is used when one spouse has reached full retirement age but is still working. The working individual would claim his or her full Social Security retirement benefit and then immediately suspend the receipt of the benefit. The individual’s spouse would then be able to collect the spousal benefit while the worker's own benefit continues to grow by 8% per year up to age 70. Requests to file and suspend on or after May 1, 2016 will be subject to new rules that prohibit any benefits being paid to a spouse while a worker's benefit is suspended.