Q & A: June 2016

Can You Tell Me About The New Social Security Changes?

Q:  What can you tell me about changes to Social Security that went into effect recently?  I’ve read references to benefits that I didn’t know I was entitled to.  Several emails warned that I would lose them as of April 30th. 
 The e-mails wanted me to subscribe to a service at a “discounted” price of $500 a year in order to learn about the benefits and how to apply before they are gone.  I didn’t go for it but can you tell me if this a scam?

A:  TSCL strongly advises against spending $500 a year to find out about Social Security benefits.  One shouldn’t pay $500 a year — or any amount — for information that can be obtained at no charge from the Social Security Administration.  One risk is that you could wind up spending a large sum only to learn the changes don’t apply to you, or you can’t use the advice.

The changes, that were signed into law last November, ended a popular Social Security claiming strategy for married couples known as “file and suspend” and “restricted application.”  One member of a couple would file for just a spousal benefit at full retirement age.  The other member would file and then suspend his or her retirement benefit at full retirement age.  This allowed the retirement payouts of both to grow 8% a year through delayed retirement credits until age 70, resulting in potentially tens of thousands of dollars in higher Social Security retirement income.

It took four months for Social Security to post guidance for the new claiming rules, leaving only 60 days for those affected to take action.  Whether the changes affected you depends on your age, marital status, and other circumstances.  You are grandfathered in if:

  • You have already filed a claim and requested to suspend benefits with Social Security prior to April 30, 2016.  If you are married, and submitted a claim and request by that date, and your spouse later becomes entitled to benefits after that date, he or she will not be cut off by the new rules.  After April 30, 2016, if you suspend your benefits to allow them to grow, the benefits of anyone receiving benefits on your record (other than divorced spouses) will also be suspended for the same months you request suspension.
  • You reached full retirement age (66) on or before April 29, 2016.  You will still be able to use the file and suspend strategy for claiming benefits after that date.  However, if you suspend your retirement benefit, any benefits you receive on someone else’s record will also be suspended.
  • You were age 62 or older as of January 1, 2016.  You will be able to continue to file a “restricted” application at full retirement age for a spousal benefit, while deferring your own retirement benefit to allow it to grow by 8% per year until age 70, as long as your spouse filed a claim and the request to suspend prior to April 30, 2016.
  • You are a divorced spouse.  The new rules do not apply to individuals receiving benefits based on the account of an ex-spouse.

Read Social Security’s new rules about the voluntary suspension of benefits at www.SocialSecurity.gov.  For information about new rules for “deemed filing” affecting retirement or spouse’s benefits, click here.

The decision on when and how to file a claim for benefits is highly complicated with many tax and benefit reduction implications.  A considerable amount of information can be obtained free on the Social Security website — SocialSecurity.gov — and/or by calling Social Security at 1-800-772-1213.  You may also want to check for free programs about Social Security benefits available through your local senior center, library or community college.