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Have I lost the right to collect spousal Social Security benefits before I collect my own?

The short answer is yes, if you didn’t reach age 62 by December 31, 2015.

The Bipartisan Budget Act of 2015 disrupted two strategies previously approved by the Social Security Administration (SSA) that allowed couples to maximize their benefits, including allowing one spouse to collect spousal Social Security benefits before collecting his/her own benefits.

The first strategy couples lost was known as a “restricted application” and required that your spouse had already filed for Social Security benefits and that both of you had reached full retirement age. In this case, you could file only for spousal Social Security benefits, waiting until 70 to file for your own (larger) benefits.

Starting May 1, 2016, the bill also eliminated a strategy known as “file and suspend,” in which one worker in a married couple who had reached full retirement age (FRA), but not age 70, could file for Social Security benefits, but then suspend them.

Neither option was permitted until the worker who wanted to exercise the benefit had reached full retirement age.

Here’s how it worked: The main beneficiary had to claim benefits before the spouse could claim a spousal benefit. If the main beneficiary was not ready to file for benefits, they could file – and immediately suspend – any receipt of those benefits until some later date. The spouse could then file a restricted application that allowed them to collect half of the main beneficiary’s benefit amount. Subsequently, the spouse could collect thier own benefit at a later date.

Using this strategy, both spouses could let their benefits grow until they reached the age of 70, but still get a little money sooner from the spousal benefit. The benefit currently grows at approximately 8%. It did not matter which spouse filed and suspended – and which spouse filed the restricted application – as long as both spouses were between full retirement age and 70 years old.

An example is a married couple, Sharon and John, who have both reached full retirement age (FRA). John’s benefit at FRA would be $2000. Under the old system, John could file and immediately suspend benefits until a later date when his benefit would have grown approximately 8% a year. Meanwhile, Sharon, who has also reached FRA, could file a restricted application for her spousal benefit. She would receive half of her husband’s benefit, or, in this example, $1000 a month. Her own benefit would also continue to grow. She, too, could file for her own benefit at a later date and receive a higher benefit than she would have at FRA.

[Note: A spouse can start collecting benefits as young as 62, once their spouse has either filed for Social Security benefits or (until May 1, 2016) filed-and-suspended. But in that case, the spouse will get a reduced benefit based on either their own benefit or on the spousal benefit, whichever is higher. Having done this, the spouse would no longer qualify to file a restricted application at full retirement age.]

Starting on May 1, 2016, file-and-suspend filings were no longer permitted.

In addition, spouses who did not reach age 62 by December 31, 2015, are not able to file a restricted application upon reaching full retirement age. They will no longer be able to first receive spousal benefits, then their own. Older workers who qualify can still employ this strategy.

The Advisor Insight

Under the new law that became effective October 2015, there is no longer a separation between spousal and individual benefits for a married couple. If you file for the benefit, but qualify for both (your benefit based on your own earning history and a spousal benefit), the Social Security Administration will give you the highest of the two. This is the so-called “Deemed Filing Rule.” The only spouses who are exempt (and can still file a restricted application) are those who had reached age 62 by December 31, 2015.

For many married couples, this means that the spousal benefit, which is often smaller than a retirement benefit, will never be paid. The only other exception to this rule is a surviving spouse. A widow or widower can still choose one benefit first and switch to the other later if it results in a higher amount. So, you are not losing the right to collect your spousal benefit; it’s already determined for you by the SSA.

Rose Swanger
Advise Finance, LLC
Knoxville, TN

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