On November 2nd, a new bipartisan budget was signed into law by President Obama that will become effective in 6 months. Since 2000, retirees have been able to take advantage of a loophole in the Social Security system. It in essence allowed one spouse to draw on their spouse’s benefit while they grew their own. This strategy has been known as “file and restrict”, because you file, but restrict your benefit to half your spouse’s benefit while you grow your own. The spouse who’s benefit was drawn upon could either be taking Social Security, or do what is called a “file and suspend”. They would file, but suspend their benefit to a later date.
How this new law affects you depends on what group you fall in.
(NOTE: If you are already drawing your Social Security benefits then this change does not apply to you)
Group 1: If you are under the age of 62 by December 31, 2015, then the file and restrict strategy will no longer be available. You will simply choose between your own benefit, or half of your spouse’s benefit, whichever is greater.
Group 2: If you are older than age 66 by May 1, 2016, then you are grandfathered into the old law and will be able to do the file and restrict, but only if the spouse who’s benefit will be drawn on “files and suspends” by April 30, 2016.
Group 3: If you are already taking advantage of the file and restrict, or you qualify to do the file and restrict and you do it before April 30, 2016, then you will be allowed to continue.
Group 4: If you are older than age 62 by December 31, 2015, but not yet age 66 by May 1, 2016, then you can file and restrict, but must wait until full retirement age. In addition the spouse who’s record is being drawn upon must be receiving their Social Security benefits. They can’t be doing a file and suspend.
If the new law is going to impact you we strongly encourage you to call us for more information at 248-731-7729
Daniel Shub, AIF®, RFC®
Wealth Advisor, Founder.
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