Major Changes to Social Security on the Horizon (Part 2) #SocialSecuritychanges

            Last week we were discussing some of the changes to Social Security that will be happening in 2016.  Let’s look at some more.

            Under current rules, if a married beneficiary applies for Social Security benefits between age 62 and full retirement age (currently 66), he/she will receive whichever is the highest benefit – their own or their spouse’s.  Waiting till full retirement age to claim your own benefits allows yours to grow by 8% a year while you are collecting the spousal amount.

            That option will no longer be available to most beneficiaries.  However, anyone who is 62 or older by the end of 2015 is exempt from this change.  They’ll still be able to apply for spousal benefits at age 66 while allowing their own benefits to grow.  Remember, however, that since the file and suspend strategy #fileandsuspend will be eliminated, this will only work if the other spouse is receiving Social Security benefits.

            This strategy requires careful consideration.  Couples whose benefits are roughly equal may not want to go this route if they want to allow both of their benefits to grow.  On the other hand, if they have unequal benefit amounts it may make sense for the lower earner to claim benefits and have the higher earner file a restricted application for spousal benefits.

            Even with these changes some other options will remain.  Delaying benefits till age 70 to allow your benefit to grow by 8% is not disappearing.  You can also suspend your own benefit at age 66 or later.  This is important for someone who collects a reduced benefit before full retirement age and later regrets that decision.  Once he reaches full retirement age he can suspend his benefit to allow it to grow by the 8% annual rate.  This could undo some or all of the reduction caused by claiming early.