Social Security’s More Recent Changes
The Trustees Reports for our Social Security OASDI (Old-Age, Survivors and Disability Insurance) Trust Fund have indicated since 2012 that changes need to be made to the system. The reports have essentially said that if nothing is done legislatively, the trust fund reserves would become depleted sometime between 2033 and 2035, which would mean that about three-fourths of expected benefits would be able to be paid out, coming from the payroll taxes collected from workers each year. The last major overhaul to the system was in 1983 when President Reagan signed into law the Social Security Amendments. There have been a few notable changes that you may or may not recall more recently which trimmed a couple of claiming strategies.
The legislative modifications to Social Security were due to section 831 of the 2015 Bipartisan Budget Deal that was signed into law on November 2, 2015 (you can read it at congress.gov). The changes affected couples who planned on using the “file and suspend” strategy. The elimination of “file and suspend” went into effect on May 1, 2016. If you turned full retirement age (66) before April 30, 2016, you were still eligible to take advantage of the “file and suspend” strategy, as long as you’d “filed” for the file and suspend prior to April 30, 2016, even if you did not want your spouse to begin receiving benefits immediately. “File and suspend” allowed a spouse who had reached full retirement age to file for benefits, but then immediately suspend them. “Filing” for benefits allows benefits to be paid to you, a spouse or a dependent of yours. “Suspending” the benefit suspended YOU from receiving money from social security, but your spouse or dependents still could while your personal benefit was allowed to continue to grow by earning “delayed retirement credits” until the maximum age of 70. This allowed a married couple, for example, to receive ½ of the social security benefit through the spousal benefit option, by the spouse who had reached FRA having filed and suspended. Both spouses’ own personal benefits could then continue to grow until the maximum age of 70.
“Restricted Application” was the second elimination for social security recipients. “Restricted Application” allowed a person who had reached full retirement age to file for benefits, “restrict” THEIR personal benefits and collect a spousal benefit from their spouse who was receiving their own benefit. Therefore once “file and suspend” was eliminated, the spouse who’s benefit was being claimed upon, would have to be receiving their monthly check from social security (in other words, they can not take advantage of the delayed retirement credits by allowing their benefit to grow while their spouse collected the spousal benefit). Restricted application was available to anyone who turned 62 prior to the end of 2015. That means if your spouse was receiving their benefit, you could file at FRA and receive your spousal benefit, delaying your own benefit and switching over at a later date when your benefit, through delayed retirement credits, become higher than your spousal benefit.
With the above changes signed into legislation in 2015, filers have been and are now deemed to be filing for all of the benefits that they are eligible for (for example, your own, and your spousal benefit if you are married, or if you were married for at least ten years, are divorced and not remarried). You will then receive the higher of the two benefits, and will not be allowed to switch later on (to your own benefit which under the old rules, could have grown to a higher amount through “delayed retirement credits”).
You can check your annual social security statement at ssa.gov. I have found their site to be easy to use and very helpful. Your local social security office is also a great resource. To understand how social security benefits will coordinate with your retirement income strategy, I highly recommend that you do a more complex analysis. There are decisions to be made that once elected, can not be undone. Seeking the advice of an experienced professional is a great idea.
Time will tell when and how we see the next legislative changes unfold. There have been some modest adjustments to the system, looking back at Social Security’s more recent changes.
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com SchulferAndAssociates.com , or louann.biz
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