This letter was originally sent to Wela users and Wela Strategies clients on Tuesday, December 8, 2015. There are changes coming to Social Security Benefits* and in the following note I wanted to give you the main highlights, who may be impacted, and how the changes may relate to your overall financial planning.
*As of November 2nd, 2015, President Obama signed, and thereby enacted into law, the Bipartisan Budget Act 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.
Before you start worrying about being personally impacted let me share with you who will NOT be impacted:
Anyone who is age 70 and up and is already receiving social security benefits. This group should see no change as a result of this new law.
Anyone who is between age 66 and 69 (and suspends their benefit) by May 2, 2016, will be “grandfathered in” and can still utilize the retroactive lump sum option. If you were not planning on taking a lump sum then these new legislative changes will not impact you.
Anyone who is between age 66 and 69 (and suspends their benefit) by May 2, 2016, can still have the option to suspend their benefit and allow it to grow, while at the same time their spouse can file a restricted application at full retirement age (which allows them to collect spousal benefits only).
Anyone who is age 62 (by December 31st, 2015) will still have the option to file a restricted application (filing for a spousal benefit only) when they reach full retirement age (66) as long as either: (1) your spouse “filed and suspended” their benefit prior to May 2, 2016 or (2) your spouse is already receiving their lifetime benefit (anytime between 62-70).
If you do not turn age 62 by the end of 2015 these new social security rules will apply to you. The ability for your spouse to file a restricted application (filing and collecting a spousal benefit only) if you choose to suspend your benefit will not be available. In other words, your spouse cannot collect their “spousal benefit” unless you are collecting your benefit.
From our understanding of the new provisions, once you reach your full retirement age, the option to collect a retroactive lump sum will not be available to you. This applies to anyone who has still not reached age 66 by May 2, 2016.
Of course, the Social Security Administration has the final say when it comes to interpreting this statute. Just remember when you do file you should:
- Do it in person
- Arm yourself with information
If you feel like the SSA representative you are talking to doesn’t understand the rules, keep moving up the chain until you find someone who does.
We will continue to watch this situation and keep you up to date on the latest developments as the Social Security Administration implements these new statutes.