On November 2nd, the President signed the Bipartisan Budget Bill of 2015. This is especially noteworthy, and not simply because a government shutdown has been avoided.
This law contains an important provision that will eliminate strategies which some individuals may have been planning in order to maximize their Social Security income. Prior to this new law, spouses who had earned their own benefit could opt to collect one-half of their older spouse’s benefit as soon as the younger spouse reached age 65. By taking one-half of the older spouse’s benefit and leaving their own benefit untouched until age 70, the younger spouse’s benefit would grow by 8% per year until age 70. This worked until now even if you were divorced if: you had been married at least 10 years, your former spouse was eligible for Social Security, and they were already taking their benefit.
Going forward, when you apply, you will receive the largest check you qualify for at the time you apply for benefits.
This amount will be based upon either: your own benefit, your spousal benefit, or a combination of the two. People who are already utilizing the “spousal first-then switch” strategy will be allowed to continue their benefits unchanged, as well as those individuals who apply for benefits before May 2, which is six months after the bill became law.
Generally, widows and widowers will not be affected by the new law.
Starting at age 60, a survivor can take a reduced benefit based on a deceased spouse’s benefit and then switch to his or her own benefit later if it is higher. Alternatively, the survivor can start with his or her own benefit as early as age 62, and then switch to a full survivor benefit at a later date.
If you think this new law may impact your situation, you should discuss the implications with your advisor as soon as possible.
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