Dallas, Texas, November 2015 – On November 2, President Obama signed into law The Bipartisan Budget Act of 2015.  This law contained two major changes to the Social Security system, which will affect many taxpayer’s strategies to maximize benefits.

The first major change eliminates the file and suspend method, a popular strategy used by married couples to maximize their lifetime Social Security benefits.  Under this approach, a higher earning spouse claims benefits at his or her full retirement age (currently age 66) but suspends the benefits until a later date, allowing the Social Security credits to continue to grow.  The lower earning spouse claims benefits based on the higher earning spouse’s earning record, which are more than the benefits based on his or her own earnings record.  In a provision labeled “closure of unintended loopholes,” the Act effectively eliminates this opportunity for claims filed after 4-30-2016.  This allows only 180 days from the signing of the Act for taxpayers to take advantage of this method before it is no longer available.  Any taxpayers who have been using this method, or who will file to claim benefits under this method within the next 180 days should not be affected.

The second major change eliminates the restricted application method (sometimes called the claim some now, claim more later method) for claiming Social Security benefits by married couples.  Under this strategy, a spouse reaching full retirement age who is eligible for both a spousal benefit (based on his or her spouse’s earnings) and a retirement benefit (based on his or her own earnings) could file a restricted application for spousal benefits only, then delay applying for retirement benefits based on their own earning record (up until age 70).  This would allow the Social Security credits to continue to grow.  For those who turn 62 after 2015, the Act eliminates the ability to file a restricted application for only spousal benefits.

While the Act eliminates two common strategies for claiming Social Security benefits, there are other tax and retirement planning methods still available.  If you have any questions, we encourage you to contact the Howard team to discuss what options are available to you.