Will Some Spouses Get Caught Short by New Social Security Rules?
Published on April 5, 2016
- In 2013, Social Security represented nearly half of all income for unmarried women, including widows age 65 or older, according to the Social Security Administration.
- More than 80% of retired women currently collecting Social Security took benefits early (which also means they locked in a lifetime of lower payments), according to a Nationwide Retirement Institute survey.
- Of those who did so, nearly 25% of them said if they could do it over again, they would have held out for a bigger benefit.
However, one of the new restrictions on spousal benefits will affect married women and divorced spouses while another new rule will eliminate the ability of single people to request a lump sum payout of benefits.
Here’s what’s changed under the Bipartisan Budget Act of 2015:
Spousal benefits – Right now, married or qualified divorced spouses who are entitled to both their own retirement benefits and spousal benefits can elect to collect spousal benefits only when they wait until their full retirement age of 66 to claim Social Security. (A spousal benefit is worth half of their mate’s or ex-mate’s benefit amount at full retirement age.)
In the meantime, their own retirement benefit would accrue delayed retirement credits worth 8% per year up to age 70, when they can switch to their own larger benefit.
However, the ability to temporarily claim just spousal benefits is being phased out for any married people or divorced spouses who are younger than 62 by the end of 2015. Those who are 62 or older by the end of 2015 will still be able to claim only spousal benefits at age 66, assuming their spouse has filed for benefits.
(NOTE: widowed individuals who are entitled to retirement benefits from their own earnings record as well as surviving spouse benefits a benefit will retain the option to claim one type of benefit first and switch to the other later if that change would result in a larger benefit.)
File and suspend – This provision allows a worker who is full retirement age or older to claim Social Security and immediately suspend his or her benefits. This strategy can trigger auxiliary benefits for a spouse or minor dependent child while the worker’s own benefit continues to grow by 8% per year up to age 70.
Those 66 or older can still request to file and suspend their benefits by April 30, 2016; however, with the updated rules, new requests to file and suspend on or after May 1 will be subject to new rules that prohibit any benefits being paid to family members while a worker’s benefit is suspended.
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