Fred is 68 and collecting Social Security. His wife Lisa will be 66 in the spring and plans to retire. To maximize her Social Security, Lisa is considering filing for spousal benefits at 66 and then delaying the filing for her benefits until her full retirement age of 70. She is wondering if this is something that she can do, and for the rest of 2019, the answer is yes!
However, due to changes in the Social Security rules that were signed into law in November 2015, Congress is phasing out the Social Security strategy known as “Claim Now, Claim More Later” at the end of 2019. Luckily, it is only February, and there are 11 months left to take advantage of this strategy.
How the “Claim Now, Claim More Later” Strategy Works
When it comes to Social Security, your benefit will increase by 6% to 8%, depending on when you were born, for every year that you delay, in addition to any cost of living increases.
The “Claim Now, Claim More Later” strategy is based on the fact that married individuals are entitled to either a Social Security benefit based on their own earnings or to a spousal benefit equal to one-half of their spouse’s full retirement benefit. So, when those who utilize the strategy reach full retirement age, they can choose which benefit to take. If they choose the spousal benefit, they can continue building up delayed retirement credits for their own benefit. Then at age 70, they can claim their own maximum retirement benefit and stop receiving the spousal benefit.
What the Changes Mean
The Bipartisan Budget Act of 2015 contained provisions to phase out the “Claim Now, Claim More Later” strategy. Next year, when the strategy is completely phased out, a worker will be eligible for the higher benefit, but he or she can’t choose to take the spousal benefits and allow his or her own benefits to keep increasing until age 70.
Keep in mind that the budget law’s phase-out of the claiming strategy does not apply to survivor’s benefits and benefits on an ex-spouse’s record. Surviving spouses will still be able to choose to take survivor’s benefits first and then switch to retirement benefits later if the retirement benefit is larger. Ex-spouses who are divorced for two or more years can also file a restricted application for spousal benefits and wait to claim on their own record.
What is the Rationale for this Change?
Historically, spousal benefits were designed to be paid only to the extent they exceeded any benefit the spouse earned based on his or her own work record. The phase-out of the “Claim Now, Claim More Later” strategy preserves the fairness of the incentives to delay, but it means that you cannot receive one type of benefit while at the same time earning a bonus for delaying the other benefit.
Looking for More Information about Social Security?
Social Security rules and strategies are very complex. Below are tools related to Social Security and retirement planning, that can provide more details:
- For lots of additional details about Social Security, including spousal benefits, please visit our Social Security FAQ page.
- See the Social Security Administration’s Benefits Planner, offering more details on this and other changes.
- Read our articles: Ask the Expert: Can You Explain Social Security, please?, Can You Retire On Social Security Alone?, What She Doesn’t Know About Social Security Could Cost Her Thousands, Social Security is 83! How to Get the Most Out of the Program, and If You Collect Social Security, You’re Getting a “Raise!”.
- Check out AARP’s Social Security Resource Center.
It’s Time to Rethink Your Retirement Strategy
If you are able to take advantage of the “Claim Now, Claim More Later” strategy this year before it is phased out, you should discuss it with your retirement advisor and strongly consider doing so! Once the strategy is completely off the table, people will need to take another look at their retirement strategies to see what makes sense. If you are at the stage of your life where you are saving for retirement, you should of course do your own research, and then meet with a retirement professional to help you formulate a successful and sustainable retirement plan.
Need Retirement Planning and Long-term Care Advice?
Look no further! For over 30 years my law firm and I have been providing clients with caring and compassionate legal services designed to ensure that their wishes will be carried out when they die, and that their assets are protected from the catastrophic expenses of long-term care. Over the years, as we have all grown older (sigh!), more and more clients of ours have needed retirement planning advice and long-term care financial service in addition to legal services, especially with strategies such as “Claim Now, Claim More later” being phased out. Because of this need, for the past 10 years or so, I have also been offering specialized elder-focused financial services including retirement planning services for clients looking for the best ways to retire comfortably and to be able to pay for long-term care if and when needed. Through my financial company, Lifecare Financial Services, I work with several of the top retirement planning professionals in the country to help clients achieve their retirement goals. For more details on retirement planning and on the services we provide, please click here and read our recent article, What’s the Difference Between Retirement Planning, Financial Planning, and Estate Planning?
Here at the Farr Law Firm and Lifecare Financial Services, we stay on top of the strategies you need to put in place to keep yourself and your family protected. If you’ve not done Retirement Planning, Estate Planning, or Long-Term Care Planning (or had your documents reviewed in the past 5 years – or last 3 years if you’re over 65), or if you have a loved one who is nearing the need for long-term care or already receiving long-term care, please call us to make an appointment for a consultation:
Fairfax Retirement Planning: 703-691-1888
Fredericksburg Retirement Planning: 540-479-1435
Rockville Retirement Planning: 301-519-8041
DC Retirement Planning: 202-587-2797
About Evan H Farr, CELA, CAP
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