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.

Disclosures

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts.

There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

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