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Social Security Update: New Rules for Claiming Benefits

With two useful strategies taken off the table, many couples may have to rethink how they plan for their retirement income

ON NOVEMBER 2, 2015, The Bipartisan Budget Act of 2015 was signed into law, preventing a government shutdown. But that's not all it accomplished. Included in the fine print were provisions that will put an end to two Social Security claiming strategies that many married—and divorced—couples have found useful in boosting their retirement income.

The new law contains some nuances regarding when the changes take effect and who will or won't be affected. To find out what people in or near retirement need to know, we spoke with Ben Storey, Director with Retirement & Personal Wealth Solutions, Merrill Lynch, and David Laster, managing director and head of Retirement Strategies at Bank of America Merrill Lynch.

Merrill Lynch: David, it sounds like the new rules will require a shift in the way many couples think about Social Security. What exactly has changed, and who needs to be concerned?

Answered by:


David Laster, Managing Director and Head of Retirement Strategies, Bank of America Merrill Lynch


Ben Storey, Director with Retirement & Personal Wealth Solutions, Merrill Lynch

David Laster: The changes apply to couples who are married or divorced, as well to people with dependents who are eligible for benefits based on their records.

The most well known of the strategies being phased out is the so-called "file and suspend" strategy. This was especially useful for couples with widely different earnings records. It allowed one spouse— usually the higher-earner; let's say it's the wife—to claim and then immediately suspend her Social Security benefit while her husband filed for spousal benefits based on his wife's higher income. Her suspended benefit, meanwhile, continued to grow in value by 8% a year, until she decided to file for Social Security benefits herself or reached age 70.

The second strategy that's being phased out is called a "restricted application"—more commonly known as the "claim twice" strategy. This strategy allowed a married person of full retirement age—let's say it's the husband this time—to file for a spousal benefit while deferring his own benefit and letting it grow until he was ready to claim on his own record.

Each of the strategies had the advantage of maximizing Social Security income for the couple over their lifetimes. There's no question that without them, couples will need to think differently about when and how to claim Social Security. But it's important to note that, even with these changes, a married couple will receive at least as much as—and often substantially more than—they would as two single individuals. That's because many married retirees can claim spousal or survivor's benefits based on the higher-earning spouse's record. These benefits will continue.

"Under the new rules, with some exceptions, a person can only apply for a spousal benefit if his or her spouse has also filed for benefits." —David Laster,Managing Director and Head of Retirement Strategies, Bank of America Merrill Lynch

ML: So just to clarify what's new: The spousal benefit isn't being eliminated—it's the timing of when a married individual can apply for that benefit that has changed under the new law. And the survivor's benefit is not affected.

DL: That's right. Under the new rules, with some exceptions, a person can only apply for a spousal benefit if his or her spouse has also filed for benefits. People can no longer file and then suspend their benefits, allowing them to grow, while their spouses collect on their record. And you can no longer "claim twice"—or file for spousal benefits at age 62 and then switch to your own higher benefits when you reach full retirement age or older.

ML: Are divorced spouses among the exceptions?

Ben Storey: Yes, they are. If you don't remarry and if you are 62 years of age or older, you can file for spousal benefits whether or not your ex has filed. To qualify, your ex must be entitled to benefits and the benefit you would receive on your own work record must be less than what you'd receive based on your ex's record. There's a Social Security Administration web page that explains these requirements in more detail.

ML: When do the changes take effect?

BS: If you want to take advantage of the file-and-suspend strategy but haven't filed yet, the law provides a six-month window from the date the law was signed—until April 29, 2016—for you to do so. To qualify, you have to be at full retirement age (currently 66) by April 30, 2016. Otherwise, you're out of luck.

"Anyone who's already using the file-and-suspend strategy will be grandfathered in under the new law." —Ben Storey,Director with Retirement & Personal Wealth Solutions, Merrill Lynch

The opportunity to file a restricted application, under the old rules, will continue to be available to anyone who was 62 years old or older by New Year's Day 2016. So if you were born on or before January 1, 1954, you can still collect spousal benefits at full retirement age while you hold off on collecting your own. This gives your benefit more time to grow. If you were born later than that, then you'll have to file for spousal benefits and your own benefits at the same time, and you'll receive whichever is higher.

As usual, there are some special situations that fall outside these general guidelines, such as the rules for divorced spouses I mentioned—but those are the basics.

ML: What happens if you've already claimed benefits using the file-and-suspend strategy?

BS: Anyone who's already using the file-and-suspend strategy will be grandfathered in under the new law. You can continue to suspend your payments until you turn 70, while your spouse claims spousal benefits based on your earnings.

ML: If you're still eligible to take advantage of either of these strategies, what do you need to do?

BS: You can apply for either benefit online at the Social Security website or by phone. And you can apply in person for the file-and-suspend option, just as long as you do so before the April 29 deadline. If you have any questions, talk with your financial advisor. It's also a good idea to consult with an attorney who specializes in elder law.



For more information on the sorts of things to consider before deciding when to claim Social Security

Read More

ML: What's your best advice for couples who can no longer take advantage of the two phased-out strategies?

DL: It often makes sense for the higher earner—let's say it's the husband—to wait at least until full retirement age to claim benefits. Doing so will boost his benefits throughout his lifetime and, should he die first, throughout the lifetime of his spouse as well, thanks to the survivor benefit.

The lower-earning spouse can always consider claiming Social Security at age 62, and then request a spousal adjustment once the other spouse files for Social Security. That only works to your advantage if the spousal benefit is higher than your own retirement benefit at full retirement age. If both spouses have similar earnings, the higher earner could wait to claim benefits at age 70, while the lower earner claims as soon as he or she reaches full retirement age.

ML: David and Ben, thanks for shedding light on such a complicated and important area of retirement planning.

DL: Our pleasure. These changes are going to affect the way a lot of people approach retirement, and knowledge is power.

3 Questions to Ask Your Advisor

  1. What role will my Social Security benefit play in my total retirement income?
  2. What strategies can my spouse and I use to maximize our Social Security benefits?
  3. Would waiting until age 70 to claim Social Security make the most sense for me?

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