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2015 Budget Act, How will affect your Social Security Seminars?
The 2015 Budget Act contained immense changes to Social Security. These changes will change the way advisors will plan for Social Security with their clients from this day forward.
The first major change in the bill was Section 831(a)-This Section extends the rule to all ages for anyone born January 2nd 1954 or later.
In other words, prior to the act someone could, once they reached full retirement age file for only a spousal benefit while allowing their own benefit to accumulate delayed retirement credits and then later switch over to their own larger retirement benefit.
After the act, only people born Jan 1, 1954 or earlier will continue to have this option available to them.
The other major change is this: before if you were not eligible for a benefit because your spouse had not filed yet you did not have to take it and you would have the choice of when you added that spousal benefit. Now if you file for a retirement benefit and then later become eligible for a spousal benefit that benefit must be paid immediately upon your eligibility for it. So there is no longer that month of entitlement rule that allows you to avoid eligibility and then later switch over.
So what is the major impact? The restricted applications for only spousal benefits with the ability to later switch to retirement benefits will no longer be available for individuals born Jan 2nd 1954 or later.
The second major changes were section 831(b)-This section modifies voluntary suspension rules. These rules have changed quite a bit. In short, if you have a spouse that is claiming off you and you suspend your benefit. (Use a voluntary suspension) in the past only your benefits would be suspended and your spouse’s benefits would continue. Under the new rules when you suspend your spouse’s benefits will also stop.
Under this section it will also eliminate the ability to claim other benefits while the wage earners benefit is suspended. In addition, it will also eliminate the file and suspend where it gave a person the ability to request retroactive benefits back to the beginning of when they requested the suspension. This was a big one as people were filing at full retirement age then wait until age 70 and then request a check (a full lump sum) going back to age 66. This availability is no longer there.
So what does that mean? In the final bill they basically grandfathered some in. “Those who are born on or before May 1, 1950 can file and suspend and allow auxiliaries (spouses and children) to claim as long as the Voluntary Suspension occurs on or before April, 30.2016. After that, the file and suspend will phase itself out.”
In regards to Social Security as a whole the impact of this new law only applies to spousal and retirement benefits. It does not apply to the interaction between widow benefits and retirement benefits.
It is important to understand which rule set applies to each member of a couple. The thing to remember is there are now 3 sets of rules:
- Next 180 Days
- 180 days to 4 years
- 4 years and beyond
Depending on age, couples could fall under different sets of rules.
This new legislation is what I look at as an opportunity, while some things may be changing, now more than ever the time to be talking to all our clients that will be turning 66 prior to April 30, 2015. And we have one of the best Social Security workshops to do that. Even after all these changes take effect we have and will make adjustments to the workshop to continue to generate high end results from this program.