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New Social Security Rules Law Took Effect on November 2, 2015

In a bitterly divided Congress and the continuous bickering that’s been going on between the Republican controlled Congress and the Obama Administration, the lightening speed of this legislation becoming the law came as a shocking surprise to most people. In any case, new Social Security rules are the law now. In general, the law impacts spousal and dependent benefits. At a high level, the idea is that a spouse or other dependents should get Social Security benefits on a worker’s record only when the worker himself is taking benefits. But like all government rules, the devil is in details. Here are some salient features of this law. Pay close attention to the dates:

File & Suspend Provision

A person can still file and suspend ( and allow his eligible spouse take spousal benefits on his record while waiting his own benefits to grow) if he has attained full retirement age on or before 05/01/2016. What’s the logic behind this date? For one, it’s 6 months from the date this legislation was signed into law by the President. For others, go figure. Keep in mind that the full retirement age is based on a person’s date of birth. For those who made it to this date, I say congratulations for winning the lottery. And for those of us who are younger by  a day or more, I would say tough luck my friends.

Restricted Option

The restricted option (whereby the spouse of a person taking benefits can opt for only spousal benefits while waiting for own benefits to grow) also went through changes. According to new rules if you’re 62 or over as of 12/31/2015, the restricted option is available to you. What’s the logic behind this date? Make up one of your own. I guess some of those who will miss out on file and suspend can possible go for restricted option.

Ex-spouse Benefits
Under certain conditions an individual could claim half of the Social Security benefit on an ex-spouse’s record while letting his own benefits grow till age 70. Similar to restricted option, one can benefit from this approach if he/she is 62 or over as of 12/31/2015.

Dependent Children Benefits
As you may know, subject to family benefits limit, each eligible dependent of a Social Security recipient is eligible for half the benefits of a parent (higher of the two if both parents are eligible). Going forward dependent benefits will only be available when parent is collecting except if the parent filed and suspended on or before 05/01/2016. This is probably the most important date in my view.

Rules That Didn’t Change

  • No change to survivor benefit rules. Thank god.
  • No change to delayed retirement credit. The supposedly risk free 8% annual increase to delayed benefits is still available. Coupled with the compounding effect of COLA (Cost of Living Adjustment), it’s a very important option for people who’re likely to live longer.

 

Social Security Maximizer™ & New Rules

Obviously, this impacted the Social Security Maximizer™. We worked feverishly (including over the weekend, thank you GoWealthPro team) to implement all the changes that are part of this law. The challenge was to make sure the old rules work for those who are still eligible while new rules should apply to the rest. In any case, we’re happy to inform you that we’ve upgraded the software with new rules. Yippy…..

I hope you find this update helpful.

Dinesh

Significant Changes to Social Security Rules on the Deck

This week’s bipartisan budget deal that was agreed between Congress and the White House will significantly impact Social Security benefits. In particular, it affects spousal and dependent benefits related strategies, namely ‘File and Suspend‘ and ‘Restricted Option‘. A quick note on these strategies: In case of a file and suspend, one spouse files for benefits and immediately suspends until a future date up to age 70 allowing the other spouse (if eligible) to start claiming spousal benefits. This allows the first spouse to increase benefits via delayed credit while the second spouse collects spousal benefits and also gets to take delayed credit to her own benefits should she switch over to her own benefits later (if higher). Under a ‘restricted option’ (aka restricted application), one spouse is already collecting benefits on his/her own record and the second spouse (if eligible) can restrict benefits to just spousal benefits and can later take higher benefits (with delayed credit) based on personal record.
While the details are still emerging from the deal and it is not the law at this time, here’s what you need to know:

  • File and Suspend provision may completely go away in near future. Those who are already benefiting from file and suspend strategy could potentially be grandfathered-in. Although there was a mention of cracking down it. In that case, such recipients may see their benefits reduced next spring through a crackdown provision. That means if spousal and dependent benefits are being claimed as a result of someone filing and suspending, those benefits will stop unless the person filing and suspending starts taking benefits.
  • The Restricted Option will not be available to those who will be turning 62 in 2016 or later.
  • It is not affecting standard delayed credit i.e. getting 8% increase in benefits for each year in delayed benefits until age 70.
  • We’re studying the effect of this change to ex-spousal and survivor benefits to an individual who is also eligible for Social Security benefits on his/her own record.
  • If it becomes the law either in its current or revised form, we will quickly update the Social Security Maximizer™ software.
  • Even if File and Suspend and Restricted Option strategies are eliminated, you still need to do Social Security planning and take advantage of other benefits maximization approaches.

Medicare premium to rise by 52% for about 3 million higher earners

In 2016, higher earners  (>$85k single/ $170k couples) could see a significant increase to their Medicare Part B (doctor visits) premium. Additionally, Social Security’s ‘Hold Harmless’ provision tying the Medicare premium increase to cost of living adjustment (COLA) applies to only those Medicare subscribers who are already taking Social Security benefits. It does not apply to those who have deferred  their Social Security benefits (file/suspended).

Read more on this issue in this article from Anne Tergesen http://finance.yahoo.com/news/unexpected-spike-medicare-premiums-151800550.html

Social Security Checkup™ Upgraded

The Social Security Checkup™ product has been upgraded to provide dynamic summary of Social Security related issues and approaches. This summary is based on the specific situation of the user.  Checkout the new functionality at www.gowealthpro.com/socialsecurity/sampleadvisoryfirm.com.

The Social Security Checkup™ product is a branded tool that’s used for effectively engaging prospective clients on Social Security.

Application of WEP

I have an interesting Social Security situation. The wife (who is currently 64) has a $1,000 monthly income from her government pension, she is subject to the WEP. Can the wife start taking her own PIA now (net of WEP), and later switch to taking 50% of her husband’s when she reaches 66? Since she is subject to the WEP adjustment, can she still take the greater of 100% of her own PIA or 50% of her husband’s?