If you are in your 60’s, better read this: Social Security rules just changed.

In a severe blow to retirement planning for millions, Congress just eliminated popular Social Security claiming strategies that married couples have utilized to get the maximum from their retirement benefits.

What Changed?

Congress’s rule change killed a strategy called ‘File and Suspend’ that allowed spousal and dependent benefits to be paid while you continue to earn delayed retirement credits. It will no longer be possible to file a restricted application for just spousal Social Security benefits.

In short, File & Suspend allowed you to file at Full Retirement Age (FRA) for your Social Security benefits. This filing triggered spousal benefit eligibility. That spouse would then begin to collect up to 50% of the your FRA amount while earning delayed retirement credits on his/her own benefit. (For this this strategy to work, the spouse must be at or over FRA.)

Then you could voluntarily suspend your own benefit until a later time up to age 70 when your benefits would be much larger.

Why was that huge?

Benefits are 32% larger at age 70 vs. age 66. Not only would you get more at age 70, but your spouse could switch from the spousal benefit to his/her own benefit at age 70 if that benefit was larger due to waiting. The total dollar value could make a big difference in security and/or lifestyle.

Put another way, it will no longer be possible for both spouses to let their earned benefits grow until 70, while one collects a small check.

Who is impacted?

The rule change cuts options and potential Social Security income of those born in 1954 or later. That’s more than half of Baby Boomers.

Who can still use these income-maximizing strategies?

The law grandfathers anyone currently using file-and-suspend and anyone born in 1953 or earlier. If you are 62 by 2015 year-end, you’ll still be allowed to claim a Restricted Application for spousal benefits at 66 if your spouse is collecting, while earning delayed retirement credits for claiming your own larger benefit later (up to 70). 

The new rules are scheduled to take effect 6 months after the legislation is passed.

What now?

Even with the rule changes, households can (should) still do meaningful Social Security benefit planning. It’s essential to understand how to maximize your benefits and when to start. Planning for retirement income from all sources is a fundamental need. And with the rule change, you will want to know how to manage other retirement income sources to make sure you have what you need, when you need it.

To read more, here is an excellent resource:

https://www.kitces.com/blog/congress-ends-file-and-suspend-restricted-application-and-other-voluntary-suspension-social-security-strategies/