Recently, Congress included surprising Social Security rule changes in the 2016 budget legislation.  The bill has now become law and the updated rules will become permanent over a phase-in time period.  We wanted to reach out to all of our clients to help better explain what you may be hearing in the news and describe how the change will affect you personally.  For a more detailed explanation of your personal situation, please feel free to contact us.

Rule Definitions

There are two general rules that were affected by the recent legislation:  File and Suspend and Restricted Application.   Below are brief definitions of the two rules:

  • File and Suspendis a claiming strategy where an individual files for Social Security benefits at full retirement age (generally 66) and then suspends receiving benefits until a later point in time.  This strategy was often used in conjunction with the Restricted Application strategy.
  • Restricted Applicationis a claiming strategy where a spouse or former spouse is able to file for spousal benefits at full retirement age (generally 66) while allowing their own benefits to grow at a rate of 8% per year.

Phase-In Timing

The new law allows for a phase-in of the Social Security rule changes.  If you are currently receiving benefits, you will be unaffected by this legislation.  If you have not started benefits, the following birthdate ranges will show which strategies are still applicable for your personal situation:

  • Born May 1st, 1949 and earlier – You have the ability to file and suspend your benefits between now and May 1st, 2016.   After that time period, the file and suspend benefit will no longer be in place.   You will also be eligible for spousal benefits using the Restricted Application claiming strategy.
  • Born Between May 2nd, 1949 and December 31st, 1953 – You no longer have the ability to file and suspend your benefits.  You will be eligible for spousal benefits using the Restricted Application claiming strategy.
  • Born January 1st, 1954 and later – You will no longer have the ability to use the file and suspend or restricted application strategies when claiming Social Security benefits.

Overall, the removal of the Restricted Application and File and Suspend claiming strategies will have a slight effect on some people’s retirement plans.   At Rockbridge, we are able to help you navigate these changes and how they impact your overall retirement lifestyle.

Please feel free to reach out to any one of our advisors and we can describe how these changes impact your personal situation in more detail.