How Social Security is — and is not — changing in 2016

By Michael R. Sceiford

If you’re married and nearing retirement, you’ll want to review how Social Security claiming strategies for spouses are changing. Two popular spousal strategies known as File and Suspend and Restricted Application will be going away for most individuals. Here’s what you need to know:

File and Suspend
How it works: Let’s say Robert has reached his full retirement age (FRA) according to the Social Security Administration, and his wife, Judy, is ready to claim her spousal benefits. Robert could file for benefits but then suspend receiving them. Judy could begin receiving Social Security spousal benefits while Robert’s benefit would continue to grow.
What’s changing: If Robert suspends his benefit, Judy’s spousal benefit will also be suspended.
What this means for you: You can’t suspend your benefit without also suspending any benefit based on your benefit, such as the spousal benefit. However, if you’ve already set up this strategy, you can continue to use it. If you have reached your FRA and are considering File and Suspend, you must do so before April 30, 2016.

Restricted Application
How it works: In this example, Judy reaches her FRA but chooses to take the spousal benefit instead of her own (assuming Robert has already filed for his benefits). This would allow Judy’s benefit to continue to grow while she receives the spousal benefit.
What’s changing: Judy can no longer choose which benefit she wants to receive. She will automatically receive her own benefit first and then the spousal benefit if she is eligible.
What this means for you: If you were born after 1953 and delay filing for your own benefit past your FRA, you can no longer get the spousal benefit in the interim. That said, those born in 1953 or earlier still have this strategy available.

No COLA in 2016
One thing that is not changing this year is the cost of living adjustment (COLA) for Social Security benefits. Because the inflation rate for 2015 was 0 percent, those who are already receiving Social Security will see no change to their benefit level in 2016.

When you decide to file for benefits involves a number of factors, including your life expectancy, if you plan to continue working, if you need the money to support your retirement and the effect on your spouse. Before making any decisions, consult with your qualified tax advisor. Your financial advisor can then work with you to see how Social Security filing strategy and your investments fit together within your overall retirement income picture.

Michael R. Sceiford is an Edward Jones financial advisor in Port Jefferson.