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12/10/2015

Bipartisan Budget Act: The Ins and Outs of Social Security Planning

On Monday, Nov. 2, Congress enacted the Bipartisan Budget Act of 2015. This Act ushered in a number of changes affecting both healthcare and social security. Among other provisions, the Act eliminated two methods used by Social Security beneficiaries to maximize their Social Security benefits. As a tax professional, here’s what you need to know.

 

Which strategies have been eliminated?

The “file and suspend” and “restricted application” strategies are no longer options for retirees under the Bipartisan Budget Act. In the past, using the “file and suspend” strategy, individuals 62 years of age and older have been able to file for social security benefits and subsequently request that such benefits not actually be paid. This enabled their family members—spouse and/or dependents—to claim a benefit based on their work record while simultaneously suspending their own benefit in order to compound it for later.

 

Meanwhile, the “restricted application” strategy allowed individuals 62 years of age and older to apply for and collect their spousal benefits while putting off applying for their own benefits on their own work record. Doing this enabled them to receive some benefits while still earning delayed credits on their own retirement benefit, which they could do until age 70.

 

What does this mean for retirees?

The new rules under the Bipartisan Budget Act take away the “file and suspend” and “restricted application” options for anyone who isn’t yet at full retirement age. However, retirees who will be 62 or older by the end of 2015 can still take advantage of these filing methods, and if retirees are already utilizing these strategies properly, they will be grandfathered in. It is important to note that these changes will not take effect until May 1, 2016, so understanding the provisions of the Bipartisan Budget Act and learning how to take advantage of the upcoming four-month window is crucial.

 

Where can you learn more about advising clients on Social Security planning?

Just because these two strategies can no longer be utilized doesn’t mean there aren’t other valuable ways to maximize Social Security returns. To learn more about the effects of the Bipartisan Budget Act and remaining Social Security planning strategies, download Surgent’s webinar, “Critical Update: Social Security Planning Strategies Expiring Soon—Who Should Apply Now? (SSBN).”


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