Personal Finance

Money Matters: New legislation will change strategies for claiming Social Security

Q. You’ve written about strategies for claiming Social Security and my husband and I have been planning our retirement based on some of these. I’m having a difficult time understanding everything I’m reading about upcoming changes if some new Bill is signed into law. Are we grandfathered since we have already retired based on our understanding of the file and suspend strategy? I just turned 65 and my husband turned 65 in June.

A. Yes, under Section 831 of the House Budget bill that has passed both the House and Senate and will probably be signed into law by the president by the time this column is published will change Social Security claiming strategies. The two strategies are file and suspend and filing a restricted application for spousal benefits. Before the change, once a person reached full retirement age (FRA) which is 66 for those born in between 1943 and 1954, they could file and suspend their benefits. Their own benefit would increase by 8 percent a year until age 70. By filing and suspending, this would allow the other spouse at their FRA to file a restricted spousal application. They would receive a spousal benefit while letting their own benefit increase until age 70.

Grandfathering is rather limited under the bill. Spouses and children currently collecting benefits based on the work records of a husband, wife or parent who filed and suspended can continue to do so. There is also a six-month window from the date after the bill’s passage. For those currently over FRA or for those that will reach FRA within the six months after the bill’s passage may still file and suspend. Only those age 62 or older this year will be able to file a restricted application for only a spousal benefit once they reach FRA.

Without a restricted application, when a spouse applies for benefits they are deemed to have filed for both their own earned benefit and a spousal benefit. They will receive whichever is greater rather than having the choice to take one benefit and then switching to the other.

In your situation, if the bill is signed into law this month, neither of you will reach FRA within the next six months. Therefore, neither of you will be able to file and suspend. Since you are both over 62, one of you will be allowed to file a restricted spousal application. To do so, one of you must already be claiming your own benefit.

Note: On Nov. 2, the Bipartisan Budget Act of 2015 (formally the House Budget Bill addressed in this column) was signed into law. Anyone born on or before May 1,1950 will be grandfathered and may still file and suspend if they do so on or before April 30, 2016.