How a Provision of the Bipartisan Budget Act Affected Social Security Benefits for Some Married Couples
If you are approaching retirement, Social Security is on your mind. But, did you know that for some married couples, Congress recently passed an Act that has major implications on your benefits?
Enter the Bipartisan Budget Act. The act created significant changes to the Social Security program, including claiming strategies many married couples have been using to maximize their benefits.
Bipartisan Budget Act: A Background on Social Security Benefits
The Social Security Benefit available at your full retirement age are called the primary insurance amount. Social Security law sets full retirement age based on your birth year. The primary insurance amount received is based on your work and earnings record.
For people born between 1943 and 1954, full retirement age is 66. Benefit amounts vary if a person retires before or after that age:
- If you retire at 62, you receive 75 percent of the primary insurance amount.
- If you wait until 70 to retire, you can receive an extra 8 percent per year, or 132 percent of the primary insurance amount. This practice is referred to as delayed retirement credit.
(See Effect of Early or Late Retirement on Retirement Benefits for all benefit reductions and increases for all age groups and retirement ages.)
Bipartisan Budget Act Has Caused What to Change?
1) Married Couples Can No Longer Use the “Restricted Application” Method
Some dual-earner married couples who are 66 or older have been able to claim primary and spousal Social Security benefits under one earner’s account while delaying the other earner’s primary Social Security benefits. Under the new law, if an individual files for spousal benefits, the government will consider the individual to have filed for his or her own retirement benefits.
Married individuals are still eligible to claim payments worth up to 50 percent of the higher earning spouse’s benefit, if that amount is higher than payments based on the lower earning spouse’s work record. And widows and widowers can get survivor’s benefits based on the earnings of the deceased spouse, if that benefit payment is higher than their existing benefit.
- People who are already using the restricted application method can continue using it.
- People who turn 62 after January 1, 2016, can’t use the restricted application method.
- People who are 62 before January 2, 2016, can use the restricted application method when they reach full retirement age.
2) You Can’t File and Suspend Your Benefits
The new law also eliminates the ability to file and suspend claiming Social Security benefits (Where you file for Social Security benefits, thus allowing your spouse and dependents to begin collecting, but suspend your own benefits to get delayed retirement credits.) Under the new law, if you file and suspend benefits, no other family member can collect benefits on your account.
- This provision takes effect April 30, 2016.
- Couples who are currently using the file and suspend method can continue using it.
- Also, individuals reaching full retirement age before this change took effect could apply for benefits using the file and suspend method.
Rethinking Your Retirement Strategy
If you are a married couple nearing retirement and want to maximize your Social Security benefits, you should re-evaluate your strategy with these changes in mind. View additional retirement resources and connect with an expert Tax Advisor in your neighborhood to plan for your overall tax and financial planning through important life events.
(NOTE: In the context of this article “retirement” means the date you start collecting Social Security benefits, not necessarily the date you stop working.)