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New Social Security Rules By Daniel T. Newquist, CFP®, AIF® Dan Newquist, CFP®, AIF®, Principal & Senior Wealth Advisor with RNP Advisory Services, Inc., a registered investment advisor, Morgan Hill. He can be reached at 408-779-0699 or dnewquist@ RNPadvisory.com. Securities offered through Foothill Securities, Inc., member FINRA/SIPC, an unaffiliated company. W hen Congress unexpectedly eliminated two Social Security claiming strategies as part of the Bipartisan Budget Act of 2015, retirement planning got a little more complicated for people who expected to use those strategies to boost their retirement income. Below are highlights if you are wondering how the new rules might affect you. What’s changing? These strategies, known as “file and suspend” and “restricted application for a spousal benefit,” have often been used to increase cumulative Social Security income for married couples. The provision of the budget bill called “Closure of Unintended Loopholes” has eliminated these strategies for most future retirees, but you may still have time to take advantage of them, depending on your age. File and suspend: Under the old rules, an individual who had reached full retirement age could file for retired worker benefits in order to allow a spouse or dependent child to file for a spousal or dependent benefit. The individual could then suspend receiving their own retired worker benefit in order to accrue delayed retirement credits and claim an increased worker benefit at a later date, up to age 70. For some couples and families, this strategy increased their total lifetime combined benefit. Under the new rules, effective for suspension requests submitted on or after April 30, 2016 (or later if the Social Security Administration provides additional guidance), the worker can file and suspend and accrue delayed retirement credits, but no one can collect benefits on the worker’s earnings record during the suspension period, effectively ending the file-and-suspend strategy for couples and families. Restricted application: Under the old rules, a married individual who had reached full retirement age could file a “restricted application” for spousal benefits after the other spouse had filed for retired worker benefits. This allowed the individual to collect spousal benefits while delaying filing for his or her own benefit, in order to accrue delayed retirement credits. Under the new rules, an individual born in 1954 or later who files a benefit application will be deemed to have filed for both worker and spousal benefits, and will receive whichever benefit is higher. He or she will no longer be able to file only for spousal benefits. The bottom line. A limited window still exists to take advantage of these two claiming strategies. If you’re currently at least age 66 or will be by April 30, 2016, you may be able to use the file- and-suspend strategy to allow your eligible spouse or dependent child to file for benefits, while also increasing your future benefit. To file a restricted application and claim only spousal benefits at age 66, you must be at least age 62 by the end of December 2015. At the time you file, your spouse must have already claimed Social Security retirement benefits or filed and suspended benefits before the effective date of the new rules. If you’re already using one of these, you will not be affected by the new rules. You have already met the age requirements. Basic options for claiming Social Security remain unchanged. Currently, the earliest age at which you can receive Social Security retire- ment benefits is 62, but if you choose to take benefits before your full retirement age (66 to 67, depending on the year you were born), your benefit will be permanently reduced by as much as 30%. On the other hand, if you delay receiving Social Security benefits past your full retirement age, you’ll receive delayed retirement credits, which will increase your benefit by 8% for each year you delay, up to age 70. Determining when to file for Social Security benefits is one of the biggest financial decisions you’ll need to make as you approach retirement. There’s no “one-size-fits-all” answer--it’s an individual decision that must be based on many factors, including other sources of retirement income, whether you plan to continue working, how many years you expect to spend in retire- ment, and your income tax situation. This article is intended for educational purposes only. It is not intended as investment advice. Always consult your fi nancial or tax-planning professional for guidance with respect to your specifi c situation. GILROY • MORGAN HILL • SAN MARTIN JANUARY/FEBRUARY 2016 gmhtoday.com 75