The rules on how you can collect your Social Security have changed — and it impacts everyone under age 70 to some degree. These new rules from the Social Security Administration (SSA) were signed into law in November 2015. However, for many readers of this column, there’s another important deadline. That deadline is April 30, 2016, only a few short weeks away.
Since nearly every American pays into Social Security and expects to receive lifetime payments at some point from Social Security, it’s crucial for everyone to have a grasp of how it works.
The looming April 30, 2016, deadline doesn’t impact everyone, but for those of you who are impacted, it could be a major financial planning milestone.
Here’s who needs to pay the most attention: those of you who are between age 66 and 69 before or by April 30, 2016.
There are two key things that are going away for this age range (forever) unless you act by this deadline.
1. A retroactive lump sum benefit — This option allows you to suspend your monthly benefits at full retirement age (i.e., you don’t collect monthly payments), and then you are able to go back to the SSA before age 70 and collect all of your foregone payments in one lump sum. Let’s look at an example. Bob, who is 66, can “file and suspend” before April 30, and for every month he chooses not to take a monthly Social Security payment, his future monthly amount will go up. But at age 69, Bob decides to take a trip around the world. To pay for the trip, he goes back to the SSA and collects all of the payments he didn’t take. Bob would choose this lump sum in lieu of taking his increased monthly payments. Then his new monthly payments would begin, as if he started collecting at the ripe young age of 66, not 69.
2. Ability for your spouse to collect a benefit, even if you’re not. For example, Bob, who is 66, can “file and suspend” before April 30, which allows his wife, Mary, to file a “restricted application” and collect her spousal benefit only, while Bob’s continues to grow. Keep in mind, Mary can only do this once she reaches her “full retirement age,” and she would have to have turned age 62 by the end of 2015.
There are two more groups to talk about:
Those who reached age 62 before the end of 2015, and those who did not.
Let’s start with those who did not, the “younger than 62 group.” There is nothing that you need to do now in relation to the April 30 deadline. In fact, the options listed above will not be available to you once you reach retirement age.
Anyone who did reach age 62 by the end of last year will still have the option to “file a restricted application” (filing for a spousal benefit only) when they reach full retirement age (66) as long as either: (1) your spouse “filed and suspended” their benefit prior to the April 30 deadline or (2) your spouse is already receiving their lifetime benefit.
Of course, the Social Security Administration has the final say when it comes to interpreting the new rules. Just remember when you do file, you should:
- Do it in person.
- Arm yourself with information.
- Make your in-person appointment long before the April 30 deadline.
If you feel like the SSA representative you are talking to doesn’t understand the rules, keep moving up the chain until you find someone who does.
To learn more about how to best utilize Social Security in your retirement strategy, I suggest you read my latest book, “You Can Retire Sooner Than You Think.” To learn how to maximize your Social Security payments, use the Social Security optimizer in the tools section of wesmoss.com.