The Bipartisan Budget Act of 2015 included significant changes to Social Security's rules. Our software is now fully updated to account for these new rules.
The new rules dramatically change Social Security claiming options and effectively divide each individual into one of three groups:
- People born on or before May 1, 1950 will be the least affected, although if they plan to suspend their retirement benefit in the future, they must request to do so before April 29, 2016. Those born on or before May 1, 1950 who will have requested suspension by April 29 will still receive auxiliary benefits, i.e. spousal and child benefits, during suspension.
- People born between May 2, 1950 and January 1, 1954 will see mixed effects of the new rules on their optimal benefits filing strategy.
- People born on or after January 2, 1954 will be the most affected in terms of the effects of filing and suspending as well as not being able to file a restricted application for either just a spousal benefit or just a retirement benefit even after their full retirement age. They will not receive auxiliary benefits during suspension.
Individuals in groups 2 and 3, as well as married couples with at least one spouse in group 2 or 3, should recalculate their maximized strategy now that our software is updated to reflect the new rules. Here's how the new rules can affect you:
- No one can collect a spousal or child benefit based on the covered earnings record of a worker who suspends retirement benefits on or after April 30, 2016, during the period that the worker's retirement benefit remains suspended. Those born after May 1, 1950 cannot file and suspend within this window and those born on or before May 1, 1950 must request to suspend on or before April 29, 2016 to allow auxiliary benefits to be claimed on his or her record while their retirement benefit is suspended.
- No one who requests to suspend his or her retirement benefit on or after April 30, 2016 can collect an excess spousal or excess widow(er)'s benefit while their retirement benefit is suspended
- For those born on or after January 2, 1954, deeming is extended through age 70. Deeming is the requirement that if you take your retirement benefit and are eligible for a spousal benefit or a divorced spouse's benefit, you need to also take your spousal benefit and vice versa. This leaves you with roughly the larger of the two benefits.
- Only those who suspend their retirement benefit on or before April 29, 2016 will be able to receive a lump sum payment of previously suspended benefits. Those who suspend their retirement benefits on or after April 30, 2016 can no longer receive their suspended retirement benefits in a lump sum payment.
- Those who are subject to deeming, but aren't deemed to be filing for their excess spousal benefits when they file for their retirement benefit because their spouse has not yet filed for his/her retirement benefit will be so deemed as of the date their spouse files for his/her retirement benefit.
Why does my retirement benefit decrease in 2017?
While the 2015 Social Security COLA, which is used to adjust 2016 benefits, was 0%, the 2015 CPI-W, the inflation index upon which the COLA is based, was -0.412%. There was deflation, i.e. negative inflation in the CPI-W index. Future inflation has to make up the deflation in 2015, which means that the 2016 COLA will be smaller than the 2016 inflation.
For example, if inflation, as measured by the CPI-W, is 3% in 2016, the 2016 COLA will be 2.6%. Hence, your 2017 benefit, in real 2016 dollars, is smaller than it would have been had there not been deflation in 2015.
What if I don't have access to my deceased or divorced spouse's past covered earnings?
Social Security will tell you your widow(er)'s benefit or your divorced spouse's benefit gross monthly estimate at your full retirement age. Be sure to ask for your benefit. Don't ask for your deceased spouse's or your ex-spouse's benefits. Social Security cannot, and will not, give you their benefit information because of privacy laws.
You can enter your gross monthly estimate and we can then use it to calculate any benefits you might be able to receive based on your deceased or ex spouse's record.
Why are there benefit in both the retirement benefit and spousal (or survivor) column?
This reflects the way Social Security accounts for the total spousal or total widow(er)'s benefits. The first part is based on the recipient's own work record and is listed in the retirement benefit column while the second part, the excess spousal benefit or excess widow(er)'s benefit, is based on the recipient's spouse's record and is listed either in the spousal or survivor benefit column.
Can I really suspend?
While suspending receipt of a retirement benefit is still allowed under the Bipartisan Budget Act of 2015 , the utility of doing so depends on specific birthdates.
If you were born on or before May 1, 1950, you can suspend receipt of your retirement benefit at or after your full retirement age (FRA) up to age 70 and still receive spousal and child's benefits off of you record during suspension, although the request to suspend must be made by April 29, 2016.
If you were born after May 1, 1950, you can suspend receipt of your retirement benefit at or after your full retirement age (FRA) up to age 70 but no one can receive spousal or child's benefits based on your record during suspension.
See this rule from Social Security Administration’s Program Operations Manual System (POMS) :
GN 02409.110 Conditions for Voluntary Suspension A. When voluntary suspension is possible 1. Requesting voluntary suspension Any primary retirement insurance benefit (RIB) applicant or beneficiary, whether reduced or unreduced, who has reached full retirement age (FRA) may voluntarily ask that we suspend his or her benefits to earn voluntary delayed retirement credits (VOLDRC). This request may be either written or oral, and we do not need a signature. A representative payee can make the request on behalf of the beneficiary. Note: The receipt of disability insurance benefits (DIB) prior to RIB has no effect on a beneficiary’s request to voluntarily suspend his or her RIB.So there is no question whatsoever that you can suspend your retirement benefit at or after your FRA. Full POMS URL: https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409110