Making a plan for your retirement is an important thing to do. This includes planning for incapacity and death by having an estate plan (a Will, power of attorney, advance health care directives and a trust is applicable) and also planning for your financial future. Recently, changes were made that will affect those claiming Social Security benefits. On November 2, 2015, the Bipartisan Budget Act of 2015 became law. The Act, in section 831, closes two Social Security benefit strategies – File and Suspend and Claim Now, Claim More Later.
Under File and Suspend the higher earning spouse applies for benefits at Full retirement Age (FRA) and then immediately suspends receipt of benefits until age 70. The lower earning spouse is then able to receive spousal benefits while the higher earning spouse earns Delayed Retirement Credit (DRC). This results in a larger benefit for the higher earning spouse at age 70. Under the Act, this strategy will close after May 2, 2016. Spouses will no longer be able to collect off of a suspended benefit and the higher earning spouse will not be able to collect back benefits from the date of the suspension.
With the Claim Now, Claim More Later strategy, the lower earning spouse applies for benefits and the higher earning FRA spouse files for spousal benefits. Claiming spousal benefits allows the higher earning spouse to delay receipt of his/her own benefits thereby earning DRCs. Upon reaching 70 the higher earning spouse switched to his/her own benefit which has increased. The Act has eliminated this strategy by extending the deemed filing rule to age 70. The change applies to anyone turning 62 in 2016 or later. Under the change in the Act, if a person is entitled to a retirement benefit and a spousal benefit, when he/she files for benefit the large of the benefits will automatically be received.
The above strategies do not immediately terminate and a financial advisor can determine if these strategies would be of benefit to a couple considering applying for Social Security retirement benefits.
Your retirement planning shouldn’t be concerned only with financial issues. Good planning encompasses estate planning so that your wishes are carried out after your death and before in the event of incapacity. The attorneys at Gibbons | Neuman are here to assist you with that crucial legal planning. Give us a call.