As of November 2nd 2015, President Obama signed, and thereby enacted into law, the Bipartisan Budget Act (BBA) of 2015. Subtitle C, Section 831 of this bill includes significant changes to social security benefits. These changes include the phase out of filing strategies referred to as “unintended loopholes” created previously by Congress back in 2000.
Who Do The New Rules Apply To?
Regardless of when you plan to retire, these changes can affect the retirement plan you’ve developed for yourself and your family, as the act prohibits the use of strategies traditionally utilized to maximize benefits. If you did not turn 62 by the end of 2015, these Social Security changes will affect you. Here are the two main changes coming down the pipeline:
1. Restrictions on spousal benefits. Before the BBA, if a beneficiary reached full retirement age, they were able to restrict their application to spousal benefits only so that their retirement benefits could continue to accrue.
However, under the new law, this will no longer be an option. Your spouse cannot collect their benefits unless you collect yours at the same time. No matter what age you are when you apply for benefits, you will have to take the highest benefit you’re eligible for, whether it’s a retirement or spousal benefit.
2. Collecting a retroactive lump sum is no longer an option. Before the BBA, you could suspend your benefits and reverse that decision later to claim a retroactive lump sum that dated back to the day you filed your application. Under the BBA, once you reach your full retirement age, the option to collect a retroactive lump sum is no longer available.
Who Will NOT Be Impacted By The BBA?
The following people will not be impacted by these new regulations:
- Anyone age 70 and over currently receiving Social Security benefits will not be affected by the changes from the BBA.
- Anyone between the ages of 66 and 69 who suspends their benefits by April 30, 2016 will be “grandfathered in” and can still utilize the retroactive lump sum option.
- Anyone between the ages of 66 and 69 can suspend their benefits by April 30, 2016 to allow them to grow. At the same time, their spouse can file a restricted application at full retirement age.
- Anyone who turned 62 by December 31, 2015 will still have the option to file a restricted application when they reach full retirement age (66) as long as either their spouse has filed and suspended their benefit prior to April 30, 2016 or their spouses are already receiving their lifetime benefit.
Additional Frequently Asked Questions
- Were you planning to file and suspend your benefits for a future retroactive lump sum?
- Did you want to suspend your benefit and let it grow so that your spouse can file a restricted application?
- Does spousal or retirement provide the highest benefit?
The answer to all of these questions is if you thought you’d be able to choose, the BBA has changed that law so that now you will receive the highest amount, regardless of which benefit it is.
There are numerous questions surrounding the Bipartisan Budget Act and how it may impact your Social Security options. If you are worried about how the new laws are going to affect you, please be sure to speak to a qualified financial advisor that can assist you. For additional information, download this free e-book, “Last Chance: Social Security’s Big Change.”
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