The 2015 Bipartisan Budget Act ("The Act") was signed into law by President Obama on November 2, 2015.  The Act affects several key Social Security claiming strategies, but leaves others unchanged, as described below:  Please note that the following are general rules only.  There are numerous exceptions that may apply in any particular situation.

1.  If you have already filed and suspended, or filed a Restricted Application for Spousal benefits, you are "grandfathered in".  Note that that their is a big difference between filing and suspending as a strategy to allow a spouse or other dependent to collect a spousal benefit - and filing and suspending simply to allow one's own retirement benefit to grow from age 66 to age 70.  The Act has addressed - and will phase out - only the former use.  The use of "voluntarily suspending" after reaching full retirement age remains unchanged.

2.  If you have not already filed and suspended for the purpose of allowing a spouse to (eventually) claim a spousal benefit, and you will not be 66 by April 29, 2016, the file and suspend strategy will not be available to you.

3.  If you will not turn 62 by December 31, 2015,  you will not be able to file a "restricted application for spousal benefits", a strategy which allows one to claim a spousal benefit while letting their retirement benefit grow by eight percent annually from age 66 to age 70.  Instead of being able to file a restricted application, you will instead be "deemed" to be filing for both benefits whenever you file for either the spousal or retirement benefit, and will be able to collect only the highest one.  So if you are not going to reach age 62 by December 31, 2015, the "claim now, claim more later" strategy is no longer available.

4. The phasing out of filing and suspending as a strategy will eventually mean that when a worker suspends a retirement benefit, any dependent benefits, such as a spousal benefit, a child benefit, or an in-care spousal benefit, will be suspended as well.

5.  If your spouse will be 62 before the end of 2015, and you will be 66 by April 29, 2016, but you won't be at least 7o when your spouse turns 66, you will need to file and suspend before April 29, 2016.  Otherwise, when your spouse turns 66 and wishes to collect a spousal benefit at that time, you must be collecting your retirement benefit at that time as well!

6. A restricted application is of no practical use if the spousal benefit at age 66 (after which time it doesn't increase in size) is higher than the retirement benefit will be at age 70.  In that situation, one would simply take the spousal benefit at 66.  This reality has not been impacted by The Act.

7.  Delaying a retirement benefit until age 70 is still the desired strategy for many - but not all - workers.  The phasing out of the restricted application simply means that there are "only" four great reasons for delaying retirement benefits (8% annual benefit growth,  inflation protection, tax benefits, and a higher survivor benefit) instead of five. 

8.  One will still be able to collect a survivor benefit at age 60, while continuing to let a retirement benefit grow until age 70.  Conversely, one will still be able to claim a retirement benefit as early as age 62, while letting the survivor benefit grow until age 66.  In short, "deeming" does not apply to survivor benefits;  the Act has not changed this.

9. There are still a number of situations where it may not be optimal to wait until age 70 to file for a retirement benefit.  These may include situations involving short life expectancies for both spouses, or when the lower-earning spouse is much younger, or when there are dependent children living at home.  Other situations may apply as well.

10. The multiple benefits gained from delaying filing for a retirement benefit are almost always large enough to justify using another source of income in order to "bridge" to a higher Social Security benefit.  This may mean that it would actually be beneficial to use one's IRA or taxable account earlier than planned.  The Act has not changed this.

Copyright © Michael Zaidlin 2015. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system without written permission from the author.

Michael Zaidlin, J.D., provides fiduciary-based financial planning and investment management to individuals, non-profit foundations and trustees, as well as small business 401(k) and pension plans as an ERISA 3(38) fiduciary. He is a graduate of the University of San Francisco School Of Law and holds series 63 and series 65 securities licenses, and is an Accredited Investment Fiduciary®.

Madrone Investment Advisory, LLC, is a California Registered Investment Advisor which provides fiduciary-based, financial and investment planning and investment management services on a flat-fee basis. Hourly-based consultations are also available.

DISCLAIMER OF TAX ADVICE: This presentation and any attachments are solely intended to communicate general information for educational and discussion purposes only. The information herein is not intended to constitute written tax advice within the meaning of IRS Circular 230 §10.37, and is not intended to be relied on, nor can it be used, for that or for any other purpose.

The information presented here is not sufficient to make an optimal Social Security filing decision. There are numerous exceptions to the rules illustrated within. Social Security claiming decisions should be made within an overall financial planning framework, taking into account tax, estate planning, and general financial planning considerations. Professional software should be used to determine the optimal claiming decision in any particular situation, and\or suitable professional assistance should be sought.

The author shall have no liability or responsibility, directly or indirectly, for any loss of damage caused, or alleged to be caused by the information, or lack of information contained herein.