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What You Need to Know About Recent Social Security Changes

In late October as part of the budget bill, three social security options for claiming benefits were eliminated. These options are file and suspend, restricted applications, and retroactive lump sum payments. The elimination of these options do not affect how Social Security benefits are calculated.


File and Suspend

File and suspend worked like this. When you reached full retirement age, currently 66, you could claim your social security benefits but immediately suspend them. By claiming your benefits, you allowed your spouse, dependent children and any others who can receive benefits based on your work to receive them. Suspending your benefits, allowed you to boost your benefit by 8% a year until you reached 70. File and suspend can still be used until May 1, 2016 by anyone who is at least 66 or turns 66 before May 1st.

Under the new law, file and suspend can still be used by an individual. But file and suspend can no longer be used to trigger benefits for others.


Restricted Applications

If you apply for benefits between age 62 and full retirement age, Social Security deems that you must take the highest benefit for which you are eligible whether it's your own benefit or a spousal benefit. This is called the "deeming" rule. Once you reach full retirement age, the restricted application strategy would allow you to choose to restrict your application to spousal benefits, thus letting your benefit grow until you turn 70. Restricted applications can still be used by those who turn 62 before January 1, 2016.

Under the new law, the "deeming" rule will apply to early and full retirement ages.


Retroactive Lump Sum

The retroactive lump sum option worked like this. If you suspended your benefits at full retirement age but later decided to unsuspend them, you could claim all benefits due since full retirement age as a lump sum. You would also forfeit any delayed retirement credits. This option can still be used by anyone who turns 66 by May 1, 2016 and also files and suspends before then.

Under the new law, you can still unsuspend your benefits but you won't receive a lump sum. You will receive your monthly payments at a higher level due to your delayed retirement credits.


For More Information

More details about these changes including examples can be found in these two articles from Kiplinger.com.

A Costly Squeeze on Social Security Benefits

Big Changes Ahead for Claiming Social Security