If you were born in 1954 or later Social Security rules just changed. There was no public debate because it was tacked onto an emergency bill to help avoid a U.S. debt default and government shutdown. Quietly, legislators took away a popular claiming strategy that benefited married couples. Surprisingly the Social Security Administration has yet to post a notice about the change on their website, doing so could take time.
In a nutshell the strategy allowed couples to take advantage of a loophole which put unnecessary stress on the system, known as “file and suspend” and “filing a restricted application”. While proponents of the strategy are miffed, the changes are good because the provision only benefited married couples.
So what’s different now? Essentially the loophole permitted a spouse to claim their personal Social Security benefit and then immediately suspend receiving it. Meanwhile the other spouse is enabled to receive Social Security spousal income benefits and forgo claiming their own. In doing so both spouses personal benefit continues to grow by as much as 8% due to delayed retirement credits. While they wait to accrue a larger benefit the household receives the reduced spousal benefit, seemingly double dipping.
While it was perfectly legal it unfairly favors married couples omitting single, widowed and divorced individuals from the picture. As of Friday April 29, 2016 this loophole is closed.
For some married couples this change may impact their plans on when to begin receiving Social Security benefits. Fortunately the formulas used to calculate benefits remains the same, so it’s still quite easy to compare your options and make a smart decision as to when you should file for social security benefits. There are several tools online to help you compare the options or you may want to consider speaking with a qualified financial advisor or retirement planning expert.