The Bipartisan Budget Act of 2015 changed the Social Security rules in several important ways, one of which goes into effect on April 30, 2016. Here’s a look at who might be able to take advantage of a Social Security claiming option that will no longer be available beginning in May and what you can still do to maximize your Social Security payments under the new rules.
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Retirees who are between ages 66 and 70 are allowed to sign up for Social Security benefits and then immediately suspend payments. Doing this allows a spouse and dependent children to claim payments based on your work record while you continue to accrue delayed retirement credits that will qualify you for larger payments when you restart your benefit later.
People who have already started this strategy or do so before April 30, 2016, will be able to use the old rules going forward. “If you suspend under the old rules, which are more advantageous, you get three rewards: Your payments increase while they are suspended, so when you resume payments they will be at a higher level, family payments are available for spouses and children, and you can unsuspend retroactively at any point from 66 to 70,” says Andy Landis, author of “Social Security: The Inside Story.” “You can not only resume your payments, but resume any or all of the payments you suspended. You can go back and get those suspended payments as a lump sum if it turns out it’s to your advantage.”
After the rule change, retirees between ages 66 and 70 will continue to be able to voluntarily suspend their payments, earn delayed retirement credits and boost their Social Security payments later on in retirement. “Even under the new rules, you can suspend your benefits and get a guaranteed 8 percent for the rest of your life for every year you delay,” says William Meyer, founder and managing principal of Social Security Solutions, a company that analyzes Social Security claiming strategies. You could increase your monthly payments by 32 percent if you suspend them for four years between ages 66 and 70.
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However, beginning on April 30, 2016, your current spouse and dependent children will no longer be able to collect payments based on your work record while your payments are suspended. “If you do not actually claim and collect your benefits, your spouse and dependent children may not collect your benefit,” says Joseph Matthews, an attorney and author of “Social Security, Medicare & Government Pensions: Get the Most Out of Your Retirement & Medical Benefits.” But a divorced spouse will continue to be eligible to receive payments based on your work record while your payments are suspended. If your Medicare premiums are deducted from your Social Security payments, you will get a bill for the premiums while your Social Security benefit is suspended.
If you voluntarily suspend your Social Security payments, you can elect to restart them at any time between ages 66 and 70. The benefit reinstatement will begin the month after your request because Social Security benefits are paid the month after they are due. Payments will automatically resume at age 70 if you don’t make another election. Under the new rules, you cannot elect to receive your suspended payments as a lump sum but can only restart them at a higher rate going forward. “If they want to unsuspend their payments and request resumption of payments, it is effective the following month, not retroactively,” Landis says.
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The date you apply for the suspension will determine which rules you must follow, and only people currently between ages 66 and 70 are eligible to apply for a suspension. “The rules for file and suspend and voluntary suspensions of payments depend completely on the request date,” Landis says. “If you request suspension on or after April 30, you are under the new rules.”
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This Social Security Claiming Strategy Will Soon Disappear originally appeared on usnews.com
