New laws that will affect Social Security benefits in 2016


Whether you are retiring now or 10 years from now, you need to be aware of these important changes to Social Security because it could impact your retirement planning.

As of November 2, 2015, President Obama signed, and thereby enacted into law, the Bipartisan Budget Act of 2015. Subtitle C, Section 831 of this bill includes significant changes to Social Security benefits. These changes include the phase out of filing strategies referred to as “unintended loopholes” — known as file-and-suspend and the restricted application for spousal benefits — created previously by Congress back in 2000.

Read more: 9 ways to spend your remaining FSA dollars

What’s changing in 2016?

I wrote this article with the intent of sharing the main highlights, who may be impacted, and how the changes may relate to your overall financial planning.

Before you start worrying about being personally impacted let me share with you who will NOT be impacted:

  • Anyone who is age 70 and up and is already receiving Social Security benefits. This group should see no change as a result of this new law.
  • Anyone who is between age 66 and 69 (and suspends their benefit) by April 30, 2016, will be “grandfathered in” and can still utilize the retroactive lump sum option. If you were not planning on taking a lump sum then these new legislative changes will not impact you.
  • Anyone who is between age 66 and 69 (and suspends their benefit) by April 30, 2016, can still have the option to suspend their benefit and allow it to grow, while at the same time their spouse can file a restricted application at full retirement age (which allows them to collect spousal benefits only).
  • Anyone who is age 62 (by December 31, 2015) will still have the option to file a restricted application (filing for a spousal benefit only) when they reach full retirement age (66) as long as either: (1) Your spouse “filed and suspended” their benefit prior to April 30, 2016 or (2) Your spouse is already receiving their lifetime benefit (anytime between 62-70).

If you do not turn age 62 by the end of 2015 these new Social Security rules will apply to you. The ability for your spouse to file a restricted application (filing and collecting a spousal benefit only) if you choose to suspend your benefit will not be available. In other words, your spouse can not collect their “spousal benefit” unless you are collecting your benefit.

From our understanding of the new provisions, once you reach your full retirement age, the option to collect a retroactive lump sum will not be available to you.  This applies to anyone who has still not reached age 66 by April 30, 2016.

What you need to do before the end of April 2016

If you turn 66 by April 29 of this year, you can still file for Social Security and suspend your benefits so your spouse can file a restricted application down the road. But you have to do this by the April 29 deadline.

Plan to do this if your spouse was at least 62 on Jan. 1 of this year. That’s because people in this age group will still be allowed to file a restricted application for spousal benefits when they turn 66, even under the new rules.

So by doing this, one spouse can take their spousal benefit right now — even as both spouses delay claiming their own benefits. And every year you wait after 66 to claim your benefits, you have an imputed return of 8% per year. So if instead of claiming your own benefits at 66, you wait until 70, the amount that Social Security pays climbs dramatically. (Benefits no longer increase after 70.)


Tips for dealing with the Social Security Administration

Of course, the Social Security Administration has the final say when it comes to interpreting this statute. So you should expect to run into problems for the coming weeks until everyone gets their head around these rules. Here are some pointers to help you navigate the waters, courtesy of The Wall Street Journal:

  • If you’re hitting a wall with a Social Security agent, ask to speak to a supervisor or technical agent. They may overrule the agent.
  • Consider filing online to avoid the possibility of dealing with a Social Security agent who doesn’t know what’s going on.
  • If you choose to file in person, bring two copies of your request and have the agent stamp both with the date. That way you’ll have at least one proof that you filed by the April 29 deadline. 


We will continue to watch this situation and keep you up to date on the latest developments as the Social Security Administration implements these new statutes so stay tuned for more. To learn more about how to best utilize Social Security in your retirement strategy, I suggest you read my latest book, You Can Retire Sooner Than You Think.

Check out the AARP website for retirement planning tools and more information here on how to make sure you’re getting the maximum benefits.

To learn how to maximize your Social Security payments even with these changes, use this Social Security Optimizer. (Full disclosure: I work for Capital Investment Advisors, the company that hosts this calculator.)

Read more: 7 ways to avoid money fights with your spouse

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