New Social Security Rules Throw Baby Boomers a Curve Ball!

UPDATE ON SOCIAL SECURITY!  Here is a Summary of some of the new Social Security rules!  For many going forward this will kill the double dip and triple dip strategy!  The Bipartisan Budget Act of 2015 has passed!

Don’t Lose Out as the new rules have deadlines!

Here is a summary of some BIG changes that you need to know about with special attention to the impact of the “File and Suspend” Social Security strategy.

For Married couples:

Certain rules are being phased in and there will be three sets of individuals that will be impacted differently depending on their dates of birth.  As a couple one may be impacted differently than the other based on date of birth.

Here are the key dates of birth and Grandfathering rules you need to be aware of.

  • Anyone who has already executed a file and suspend or restricted benefit will be grandfathered.
  • If you were born May 1st 1950 or earlier you can use the File and Suspend strategy as long as you execute this voluntary suspend before April 30, 2016. For any couples in this situation you have a short window of opportunity to take advantage of the “File and Suspend” strategy and you should consider planning now in preparation of the April 30, 2016 deadline!
  • If you were born on or before January 1, 1954 you can file a ‘Restricted’ application assuming you have reached your full retirement age. A ‘Restricted’ application will give one member of a couple the opportunity to claim a spousal benefit and then continue to grow their own social security retirement benefit.  For couples you may want to capture these benefits.
  • If you are born January 2, 1954 or after you will no longer be able to take advantage of these strategies!

If your spouse is deceased, the survivor benefit has not been touched in the new rules.  Therefore, widows or widowers can still restrict an application thereby collecting a survivor benefit while letting their own retirement benefit grow and switching over to that later (retirement benefit can grow up until age 70 at between 7-8% per year currently).

If you are divorced and you were born on or before January 1, 1954, you still have access to the restricted application, and spousal benefits, and those born after will not.  However, to get spousal benefits and defer your own benefit your ex-spouse will have had to file or file and suspend their benefits before April 30th 2016.

Going forward, aside from the above scenarios, all married or married for 10 years and divorced couples will automatically get the higher of their own social security benefit or the spousal benefit the first time they file.  They will not be able to just collect the spousal benefit while deferring their own benefit.

If you are single and born on or before May 1, 1950 and plan on delaying filing for social security benefits past your Full Retirement Age, you should file and suspend as soon as eligible. However, the suspension must be received on or before April 30, 2016 in order to fall under the old rules. Suspending benefits under the old rules currently also preserves the option to request a retroactive lump-sum payment should the client become ill or a need arises while benefits are suspended.

A financial professional who is well versed in social security can help you with what could be irrevocable and time sensitive decisions that can have a great impact on your retirement income for many years to come.

Guy A. Paredes, a Registered Representative offering securities and advisory services through Cetera Advisors LLC, member FINRA/SIPC.  Cetera is under separate ownership from any other named entity.

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