A financial question that surfaces frequently, usually from physicians ages 55 years and older, is: “When and how should my spouse and I take our Social Security benefits?” Unfortunately, the answers to these types of questions recently became complicated.
Because of legislation passed by the U.S. Congress in November 2015, the clock is now ticking–which is expected to shut doors for many individuals. This topic will be addressed in more detail later in the year. However, this column will attempt to simplify a complex topic. Just remember to explore the options thoroughly.
The first point is that individuals ages 70 or older–or those who will be 70 in 2016–will not be impacted by this legislation. Anyone 66 years or over but not yet 70 should re-evaluate their current strategies for claiming Social Security benefits before April 30, 2016.
Congress outlined these changes to Social Security as “closing unintended loopholes” in order to protect the solvency of the Social Security System. The new law will eliminate a small number of claiming strategies that could have resulted in cumulatively higher benefits for some people under the old law.
Filing a restricted application
Under the old law, individuals who had reached full retirement age were given an option to apply for one benefit and retain the ability to switch to another at a later date. For example, it was possible to claim only a benefit based on one’s spouse’s earnings, and later claim a retirement benefit based on their own earnings.
Under the new law, individuals can’t restrict their application to the benefit they want. Instead, individuals must take the highest available benefit. The new rules apply to individuals who were not age 62 by the end of 2015. Individuals ages 62 and over are “grandfathered” and they can still apply the old rules when they reach full retirement age.