New Bill Affects Social Security Claiming Strategies

You have likely heard that the House of Representatives passed 2015 budget legislation this week. The pending bill, now with the Senate, contains several provisions designed to close perceived loopholes in social security claiming strategies. Those who appear to be most affected by this legislation are those who have yet to claim their benefits and who employ the file-and-suspend/restricted spousal application strategies. In short, this pending legislation could impact planning for your social security benefits.

 

The proposed changes

The proposed legislation would eliminate one of the more commonly used strategies to maximize overall married clients’ benefits. Under the proposal, the ability to file for dependent spousal benefits on a retiree’s record, if that retiree is not currently receiving his or her benefits (i.e., if he or she has suspended benefits), will be eliminated. The dependent spouse would be restricted to receiving the higher of his or her own or spousal benefit.

 

This is our understanding of some of the proposed changes:

 

  1. If you turn age 62 after 2015, the opportunity to file a spousal-only restricted application will be eliminated. This would not impact your ability to file and suspend your own benefit in the future at your full retirement age (FRA).

  2. If you turn age 62 by year-end 2015, you may still be able to employ a restricted application for spousal dependent benefits when you reach your FRA. This option would only be available if your retiree spouse is receiving monthly benefits. Your spouse could not currently be suspending his or her benefits.

  3. There appears to be no impact on survivor benefit claiming strategy rules.

 

Many questions not yet answered

There are many questions still open regarding the law, most notably: what impact, if any, will the new law have on those already employing the current file-and-suspend/restricted application strategy? In addition, will there be any grandfathering of existing beneficiaries?

 

We are monitoring these proposed rule changes closely and will let you know as soon as possible the provisions of the final law and its possible impact on your social security planning.

 

In the meantime, if you have any questions or concerns about the information shared here, please feel free to call our office at 978-774-2266.


Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Barclays Capital government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities.


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