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Social Security Changes and Retirement Planning

Oct 11, 2016

Social Security rules which provided some planning opportunities for those approaching retirement were restricted with the Bipartisan Budget Act of 2015.  As of May 1, 2016, those who are under age 66 will be unable to use planning strategies which in the past have afforded couples more benefits from Social Security.

Several rules were affected by the changes including:

  • File and Suspend
  • Restricted Application
  • Lump Sum Rule

Let us review each change below.

File and Suspend

A spouse or child is allowed to receive benefits based on the work record of the second spouse when the second spouse files to receive their own Social Security benefit.  The file and suspend strategy allowed the working spouse to file and suspend the receipt of their own benefit to enable the second spouse to begin collection of the spousal benefits under the working spouses record. The deferral of the collection of the working spouses own benefit allows their benefit to grow 8% per year through age 70. This strategy will still be an option for those who are age 66 or older as of the end of April 2016. For those who are younger, the file and suspend rule is still available but a suspension of benefit collection for the working spouse means a suspension in receipt of benefits for spouses and children until the working spouse begins to receive their own benefits.

Restricted Application

Spouses who reached their full retirement age were previously allowed to file a restricted application to receive a spousal benefit only. The restricted application allowed the married person to receive a spousal benefit (usually ½ of the second spouses benefit amount) and enabled deferral of their own benefit until a later date. Again, the deferral of their own benefit enabled 8% growth of their own benefit through age 70.  The restricted application rule remains available to those who were age 62 as of the end of 2015. For those people born in 1954 or later, the restricted application to file for a spousal benefit only is no longer available.

Lump Sum Rule

In the past, you could file and suspend benefits and at any time prior to age 70 and request the suspension be stopped to enable the collection of a lump sum amount for all monthly payments not received since full retirement age. The option to collect the lump sum amount is no longer available for anyone under age 66 as of the end of April 2016.

All of these rule changes restrict access to benefits and reduce the total amount of benefits available to couples and families. Careful planning around the election of Social Security benefits plays an important role in your long range retirement success. Review of your benefit election options in conjunction with your overall retirement plan can provide important perspective necessary to make an informed decision about the election of benefits for you and your spouse.


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