A few years back I wrote a post about things to consider when divorcing later in life. One of these considerations was Social Security. Social Security continues to be an important topic of discussion for any couple divorcing later in life, because it can have a significant impact on income and sometimes retirement benefits.
Of course, just when we get comfortable with the rules and how they’re applied, Congress goes and shakes things up. As part of the Bipartisan Budget Act of 2015, just signed by President Obama on November 2, 2015, the federal government is eliminating two key pieces of Social Security that are important for retirement planning for married and divorce spouses alike.
Claim and Suspend
As of April 30, 2016, Congress will do away with “claim and suspend.” I detailed this in my previous post on Social Security, but here’s the short explanation. To the Social Security Administration, spouse means both a current spouse as well as divorced spouses that were married for ten years or more. The claim and suspend benefit previously allowed a married or divorced couple to simultaneously take advantage of spousal benefits and delayed retirement credits. A higher-earning spouse could file for Social Security at full retirement age and delay receipt of benefits until age 70, allowing them to earn delayed retirement credits, while the lower-earning spouse could file for their spousal benefit. After April 30th, neither a married nor a divorced spouse will be able to apply to collect a spousal benefit from a spouse’s or former spouse’s suspended benefit.
Claim Now, Claim More Later
Congress is also doing away with “claim now, claim more later” as of April 30. This valuable Social Security benefit permits a higher-earning spouse, who has reached full retirement age, to file a restricted application for a spousal benefit. This allows his or her own benefit to earn delayed retirement credits, assuming the lower-earning spouse has already filed for benefits. Upon reaching age 70, the higher-earning spouse then can switch to his or her own benefit, which will have increased in value due to the delay.
Don’t Miss Out on Valuable Social Security Benefits
Individuals who currently receive benefits under either “claim and suspend” or “claim now, claim more later” will not be affected by the changes in the law. Whether you’re going through a divorce or not, you have until April 30 to take advantage of these cost-saving measures. Contact a trusted attorney and financial advisor as soon as possible to see whether you and/or your spouse or former spouse are eligible before these valuable loopholes are sewn up.