December 15, 2015
On November 2nd 2015, a new law will become effective in 6 months (April 2016). This new law removes loopholes in the Social Security system. The major loophole allowed one spouse to draw on their spouse’s benefit while they grew their own. This strategy has been known as “file and restrict”, because you file, but restrict your benefit to half your spouse’s benefit while you grow your own. The spouse who’s benefit was drawn upon could either be taking Social Security, or do what is called a “file and suspend”. They would file, but suspend their benefit to a later date.
How this new law affects you depends on what Class you fall in. (If you are already drawing your Social Security benefits then this email does not apply to you)
Class 1: If you are under the age of 62 by December 31, 2015, then the file and restrict strategy will no longer be available. You will simply choose between your own benefit, or half of your spouse’s benefit, whichever is greater.
Class 2: If you are older than age 66 by May 1, 2016, then you are grandfathered into the old law and will be able to do the file and restrict, but only if the spouse who’s benefit will be drawn on “files and suspends” by April 30, 2016. This is a priority if you have not made this decision.
Class 3: If you are already taking advantage of the file and restrict, or you qualify to do the file and restrict and you do it before April 30, 2016, then you will be allowed to continue.
Class 4: If you are older than age 62 by December 31, 2015, but not yet age 66 by May 1, 2016, then you can file and restrict, but must wait until full retirement age. In addition the spouse who’s record is being drawn upon must be receiving their Social Security benefits. They can’t be doing a file and suspend.
Click here to download a simple set of slides that discusses the current choices. As always, everything needs to be verified for your circumstances with the Social Security department. Please share this email with your friends and invite them to receive a complimentary appointment with Peter to discuss this or other important financial topics.
Until next time,
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