On November 2nd, 2015 President Obama signed a law changing Social Security rules that eliminate the spousal social security so called  “file and suspend strategy”. This does not take effect until 6 months after law and anyone currently doing this will be grandfathered in and be able to continue to use this strategy. So anyone that will be 66 before May 2nd can still go and file and suspend their benefits allowing their spouse to claim a spousal benefit.

For the past several years a spouse at full retirement age could file and suspend their benefits, letting them increase by 8% a year plus cost of living increases until the individual turned 70. By doing this, the spouse, who might not have or need their own benefit, can apply at full retirement age for a spousal benefit. The spousal benefit is ½ of the spouse’s full retirement benefit.

Even if the spouse takes an early reduced benefit and is currently drawing, the other spouse would get ½ of the full retirement benefit. So, for example, if a husband takes an early reduced benefit of $1200 (full benefit would have been $1500) at 62, then when his spouse turns 66, she can draw a spousal benefit, which is ½ of the full retirement benefit $1500 ($750). She can then let her benefit increase by 8% a year until she is 70 and then draw on the larger of the two.

Here is a real-life example of how this works:

Wife turned 66 in August 2015.  She started drawing ½ of the FULL amount of husband’s Social Security (husband took early Social Security and is not getting full amount).  She is going to draw $1000/month for four years for a total of $48,000.  AND, she continues to let her own Social Security grow to the fullest amount possible because she is not drawing her own until she reaches 70.  Waiting until 70 to draw her Social Security will add an estimated $200/month for the rest of her life!  This makes a significant impact on their finances and their retirement plan I have no doubt that this is not how Congress intended for the law to work, but we have an obligation to our clients to use the system that we are given! 

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