Smart Business Magazine, January 2016

46 Smart Business Columbus January 2016 Social Security changes Recent legislation closes once beneficial loopholes in Social Security On Nov 2 2015 President Barack Obama signed the Bipartisan Budget Act of 2015 into law While the acts primary purpose was to raise the federal debt ceiling it also contained provisions that will affect millions of Americans entering retirement who are entitled to Social Security benefits The act moves to simplify the Social Security system while closing inadvertent loopholes that were signed into law on April 7 2000 by former President Bill Clinton says Shawn Ballinger CFP a wealth manager at Budros Ruhlin Roe Inc It effectively eliminates a married couples ability to use the well known Social Security claiming strategies file and suspend and restricted application for spousal benefits Fortunately the act does not impact those currently receiving benefits and allows those who are at full retirement age or will reach it by April 29 2016 to file for benefits under what are now the old rules Smart Business spoke with Ballinger to learn more about this change and its impact What limitations does the change to the Social Security system bring The first strategy file and suspend allowed the first spouse to file for Social Security retirement benefits but then immediately suspend them This allowed the first spouses benefit to continue to grow while the second spouse filed a restricted application to receive one half of the first spouses benefit The important point here is that a spousal benefit could not be received unless the first spouse had actually filed for his or her benefit The process of file and suspend enabled the second spouse to receive a current benefit on the first spouses record while the suspended benefit of the first spouse accrued an 8 percent increase each year it was delayed from age 66 to age 70 a potential 32 percent lifetime increase in benefits The second strategy filing a restricted application allowed the second spouse to claim a spousal benefit on the other spouses record but then switch over to his or her own benefit at age 70 The impact of one spouse filing and suspending his or her benefit and the other spouse filing a restricted application was that both spouses could effectively delay receiving their benefits until age 70 and still receive one spousal benefit while they waited Under the new rules when either spouse now files for benefits he or she is deemed to file for both individual and spousal benefits which will require the individual to receive benefits on his or her own record or the spouses record if higher The question to ask is How will this affect those nearing the age that Social Security benefits can be claimed That answer depends on the persons age and whether or not he or she is grandfathered under the old rules or subject to the new legislation At what age will someone be impacted by the changes In essence the act created three sets of rules based on an individuals birthday Those born on or before April 30 1950 Those born on or before Jan 1 1954 Those born on or after Jan 2 1954 Individuals born before April 30 1950 or who will turn age 66 by April 30 2016 will be largely unaffected by the changes as long as they identify their optimal claiming strategy and file for benefits before the April 30 2016 deadline Those who will be age 62 during 2015 or born on Jan 1 1954 or earlier will still be able to file a restricted application on their spouses benefit as long as the other spouse is receiving benefits or is grandfathered under the old rules and has filed but suspended their benefit This nuance will become especially important for married couples where one spouse will reach age 66 by April 30 2016 and the other will not Lastly those individuals born after Jan 2 1954 will be subject to the deeming rule that will require upon application for benefits claiming all benefits for which they are entitled This eliminates a spouses ability to claim a spousal benefit while earning delayed credits for his or her own record Even with the limitations imposed by the new legislation working with a Certified Financial Planner to analyze the timing around receiving Social Security benefits will continue to be an important facet of maximizing the planning opportunities available SHAWN BALLINGER CFP Wealth manager Budros Ruhlin Roe Inc 614 481 6900 shawn ballinger@ b r r com Insights Wealth Management is brought to you by Budros Ruhlin Roe Inc INSIGHTS WEALTH MANAGEMENT SOCIAL MEDIA Find Budros Ruhlin Roe online at B R R com on Twitter @ BudrosRuhlinRoe and on Facebook at facebook com BudrosRuhlinandRoe