12/14/2015
New Budget Deal Ends Social Security Claims Strategy for Married Couples

New Budget Deal Ends Social Security Claims Strategy for Married Couples

A budget deal formalized by the House of Representatives in October and signed by President Obama on November 2 has shut down a popular Social Security claiming strategy that married couples used to maximize Social Security benefits. The file and suspend option made it possible for one spouse to claim up to four additional years of spousal benefits. Over the years, it helped couples add tens of thousands of dollars to their lifetime retirement income. Though this option is off the table, the financial advisors and wealth management experts at OptiFour are here to find new strategies that comply with new regulations.

File-and-Suspend Strategy

The file-and-suspend option allowed an individual to claim Social Security benefits at full retirement age, then suspend them. Their spouse could then file for spousal benefits based on their partner’s earnings. If both individuals filed for and received spousal Social Security benefits, they could delay collecting benefits based on their earning records until later when they would receive more.

Who Used this Strategy?

Only a small number of individuals took advantage of the file and suspend option every year, though the concern within the Obama Administration and the Social Security Administration was that the option would become more and more prevalent as baby boomers moved into retirement age. Were that to occur, the already struggling Social Security fund would have been put under further strain.

Restricted Application for Spousal Social Security Benefits

New strategies are arising to take the place of the file and suspend option. If you’re 62 years or older, you’re grandfathered into another claims option that’s also being removed along with file and suspend: the restricted-application option. In this scenario, you would file a restricted application to collect spousal benefits and delay the start of your own earned benefits until you turn 70. Your spouse would begin his or her earned benefit at 66 and then switch to your higher spousal benefit rate when you start collecting. The aforementioned changes to the Social Security benefits rules will go into effect after a six-month grace period.

Responding to Changes: that’s Integrated Wealth Management

Laws change and financial strategies must change along with them. With the qualified financial planners, the goal is always to put yourself in the most advantageous position. As is always the case, when one door closes, another opens in its place. OptiFour Integrated Wealth Management employs a team of MBAs, CFPs, and CPAs to provide long-term financial planning and wealth management. For more information on services, please contact us today or visit our homepage.

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