New Legislation Impacts Social Security Strategies
First, we’ll start with the good news. This week the U.S. House of representatives and Senate passed a two year budget deal that raised the debt ceiling until March 2017. U.S Treasury Secretary Jack Lew had stated that the U.S government would begin running out of money on November 3rd if the debt ceiling wasn’t raised. In 2011, we experienced what happens when the government plays chicken with raising the debt ceiling and the outcome is not pretty. For individuals receiving Medicare, there is also good news that the increase in Medicare Part B premiums that was set to go in place next year will be delayed.
Now the bad news. The bill also increases spending by $80 billion over the next two years and pays for that spending by a number of one-time transactions such as selling wireless spectrum and 58 million barrels of oil from the Strategic Petroleum Reserves. Obviously, these are not sustainable options to improve the federal budget deficit.
The other bad news is two popular social security strategies will no longer be available. The first strategy is known as the “restricted application” strategy in which a person files for spousal-benefits-only at full retirement age while allowing their own retirement benefit to continue growing. For people who will be 62 or older at the end of 2015, the restricted-application strategy is still available.
The second Social Security strategy deals with suspension of benefits. In the past, this strategy is typically used to allow one spouse to file for benefits and immediately suspend while the other spouse files for spousal benefits. Under this new legislations you will not be able to employ this strategy as you will no longer be able to receive benefits on anybody else’s work record while your benefits are suspended and nobody else will be able to receive benefits on your work record while your benefits are suspended. There is a 180 day window from when the bill is enacted to implement this strategy.
If you have any questions regarding your social security benefits and how this bill may impact your retirement plan, please contact us to discuss.
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