How Social Security Is – and Is Not – Changing in 2016

DEWITT, Mich. - Jan. 12, 2016 - PRLog -- If you are married and nearing retirement but have not yet filed for benefits, you’ll want to review how Social Security claiming strategies for spouses are changing. If you were thinking of delaying taking Social Security past your Full Retirement Age, or FRA, two popular spousal strategies known as “File and Suspend” and “Restricted Application” will be going away. Here’s what you need to know.

What Is Changing

File and Suspend

• How it works – Let’s say Robert has reached his FRA according to the Social Security Administration, and his wife, Judy, is eligible to receive a spousal benefit in addition to her retirement benefit. Robert could file for benefits but then suspend receiving them. Judy could begin receiving Social Security spousal benefits along with her own retirement benefit, while Robert’s benefit would continue to grow.

• What’s changing – If Robert suspends his benefit, Judy’s spousal benefit will also be suspended.

• What this means for you – If you decide to suspend your benefit, you’ll also suspend any benefit based on it, such as the spousal benefit. However, if you’ve already set up this strategy, you can continue to use it. If you will have reached your FRA by this spring and are considering File and Suspend, you must do so before April 30, 2016.

Restricted Application

• How it works – In this example, Judy reaches her FRA but chooses to take the spousal benefit instead of her own (assuming Robert has already filed for his benefits). This would allow Judy’s retirement benefit to continue to grow while she receives the spousal benefit.

• What’s changing – If Judy waits until reaching her FRA to claim, she can no longer choose which benefit she wants to receive. She will automatically receive her own benefit first and then the spousal benefit if she is eligible.

• What this means for you – If you were born after 1953 and delay filing for your own benefit past your FRA, you can no longer file a restricted application to get the spousal benefit in the interim. That said, those born in 1953 or earlier still have this strategy available.

What’s Not Changing

No COLA in 2016

One thing that is not changing this year is the Cost of Living Adjustment (COLA) for Social Security benefits. Because the inflation rate for 2015 was 0%, those who are already receiving Social Security will see no change to their benefit level in 2016.

The Importance of a Strategy

When you decide to file for benefits involves a number of factors, including your life expectancy, if you plan to continue working, if you need the money to support your retirement, and the effect on your spouse. Before making any decisions, consult with your qualified tax advisor. Your financial advisor can then work with you to see how your Social Security filing strategy and your investments fit together within your overall retirement income picture.

For answers to specific Social Security questions, please contact the Social Security Administration at 800-772-1213 or www.ssa.gov.

Important Information:

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. This summarization should not be depended upon for other than broadly informational purposes. Specific questions should be referred to a qualified tax professional.