Am I losing the right to collect spousal Social Security benefits before I collect my own?
The short answer is yes, if you didn't reach age 62 by December 31, 2015.
The Bipartisan Budget Act of 2015 disrupted two strategies previously approved by the Social Security Administration (SSA) that allowed couples to maximize their benefits, including allowing one spouse to collect spousal Social Security benefits before collecting his/her own benefits.
The first strategy is known as a "restricted application" and requires that your spouse has already filed for Social Security benefits and that both of you have reached full retirement age. In this case, you can file only for spousal Social Security benefits, waiting until 70 to file for your own (larger) benefits.
Starting May 1, 2016, the bill also eliminates a strategy known as "file and suspend," in which one worker in a married couple who has reached full retirement age (FRA), but not age 70, can file for Social Security benefits, but then suspend them.
Neither option is permitted until the worker who wants to exercise the benefit has reached full retirement age.
Here's how it had worked: The main beneficiary had to claim benefits before the spouse could claim a spousal benefit. If the main beneficiary was not ready to file for benefits, he or she could file – and immediately suspend – any receipt of those benefits until some later date. The spouse could then claim a restricted application that allowed him or her to collect half of the main beneficiary's benefit amount. Subsequently, the spouse could collect his or her own benefit at a later date. Using this strategy, both spouses could let their benefits grow until they reach the age of 70. The benefit currently grows at approximately 8%. It did not matter which spouse files and suspends – and which spouse files a restricted application – as long as both spouses are between full retirement age and 70 years old.
An example is a married couple, Sharon and John, who have both reached full retirement age. John's benefit at FRA would be $2000. John can file and immediately suspend benefits until a later date when his benefit will grow approximately 8% a year. Meanwhile, Sharon, who has also reached FRA, can file a restricted application for her spousal benefit. She will receive half of her husband's benefit, or, in this example, $1000 a month. Her benefit will also continue to grow. She, too, can file for her own benefit at a later date and receive a higher benefit than she would have at FRA.
[Note: A spouse can start collecting benefits as young as 62, once his/her spouse has either filed for Social Security benefits or (until May 1, 2016) filed-and-suspended. But in that case, the spouse will get a reduced benefit based on either his/her own benefit or on the spousal benefit, whichever is higher. Having done this, the spouse no longer qualifies to file a restricted application at full retirement age.]
Starting on May 1, 2016, file-and-suspend filings are no longer permitted.
In addition, anyone who had not reached age 62 by December 31, 2015, will not be able to file a restricted application upon reaching full retirement age if he or she is married and meets the requirements described above. He or she will no longer be able to first receive spousal benefits, then his/her own. Older workers who qualify can still employ this strategy.
Your Full Retirement Age (FRA) is the magic number. At FRA, you are able to file for a spousal benefit as long as your spouse is already collecting his/her own benefit. This is a good strategy because it allows your own Social Security benefit to grow to age 70, at which time you can switch to the higher benefit. Good planning. Good luck!!
The law change of the Social Security benefit in October, 2015 has caused so much confusion, not only to the general public, but also to financial advisors and even some of the Social Security administration’s own employees.
To avoid any confusion, I will answer your question based on the new law unless you turned 62 on Jan. 1, 2016 and your spouse has filed and suspended his/her benefit on or before April 29, 2016.
Under the new law, there will no longer be a spousal or one’s own benefit for a married couple. If you file for the benefit, but qualify for both (your benefit based on your own earning history and a spousal benefit), the SSA will give you the highest of the two. This is the so-called “Deemed Filing Rule.” For many married couples, that means that the spousal benefit, which is often smaller than a retirement benefit, will never be paid. The only exception to this rule is the surviving spouse, who can still choose one benefit first and switch to the other later if it results in a higher amount.
So, you’re “not losing the right to collect your spousal benefit;” it’s already determined for you by the SSA. Best!