What Must I Do Before April 30, 2016?

There is a great deal of confusion surrounding the new Social Security rules that were put into place with the Bipartisan Budget Act of 2015 (BBA15). The part that is bothering folks the most right now is the deadline that is coming up, on April 30, 2016.

What’s important about April 30, 2016? What must I do before April 30, 2016?

The rule changes in BBA15 indicated that the suspension of Social Security benefits would be treated differently beginning 180 days after passage of the law. The law was passed on or about November 2, 2015, and so 180 days after that is April 30, 2016.

What’s the change?

First of all, in order to suspend your benefits, you must be at or older than Full Retirement Age (FRA). For folks who will be eligible to take advantage of the old suspend rule, that means you must be 66 before April 30, 2016, so you must have been born before April 30, 1950.

Previously, when someone suspended his or her Social Security benefits, his or her spouse or children could receive benefits based upon his or her record. This is still the case if you suspend your benefit prior to April 30, 2016.

After April 30, 2016, when someone suspends his or her Social Security benefits, all benefits based on his or her record will also be suspended. This means that his or her spouse or child cannot receive benefits based on his or her record while suspended.

Why would you want to suspend benefits in the first place?

For every month after your FRA that you delay receiving Social Security benefits, you accrue a delay credit of 2/3% – a total of 8% for every year of delay. This only happens if you are not receiving benefits, and it only happens after your FRA.

You can earn these delay credits by doing nothing – there is no requirement for you to do anything at all. The simple fact that you are not receiving benefits allows you to accrue this credit. You can accrue the delay credit up until the age of 70 – at that point your Social Security benefit is maximized.

On the other hand, if you file for your benefits, your dependents can receive benefits based on your record. Your spouse can receive up to 50% of your benefit amount, and your children under age 18 (19 if a full-time student, or any age if disabled) can also be eligible for 50% of your benefit amount.

“File & Suspend” gives you the ability to do both things – earn the delay credits AND provide benefits for your spouse or children. But this is only available if you file and suspend prior to April 30, 2016.

So what has to happen before April 30, 2016?

There is only one thing that must happen before April 30, 2016 if you want to take advantage of this rule before it changes: If you’re at or older than age 66 (your FRA) you must file and suspend your benefits at some point before April 30.

To do this, you have 4 choices:

  1. Go online to www.SocialSecurity.gov and apply online. When you do this, you fill out the application as if you will be receiving benefits, and then in the “Comment” section at the end of the application, write: I wish to immediately suspend my benefit to earn delay credits.
  2. You can file a paper application (form available online as well). Do the exact same thing as #1 above – fill it out as if you were going to receive benefits, and then indicate that you wish to suspend.
  3. Call 1-800-772-1213 to apply by phone. Tell the representative that you wish to file for benefits and immediately suspend them to earn the delay credits.
  4. Visit your local Social Security Administration office. Tell your representative that you wish to file for benefits and immediately suspend them to earn delay credits.

That’s all you have to do. Nothing else needs to be done before April 30.

Your dependent doesn’t have to start taking spousal or dependent’s benefits immediately or even before April 30. Since you have filed for benefits, your dependent (spouse or child) is eligible to take benefits based on your record, whenever they happen to file.

The post What Must I Do Before April 30, 2016? appeared first on Getting Your Financial Ducks In A Row.

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jim@blankenshipfinancial.com (Jim Blankenship)

6 Comments

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    • You could file and suspend prior to April 30, 2016 in order to enable a future decision to revert back to your file and suspend date to receive retroactive benefits. Otherwise, file and suspend doesn’t have any benefit to your situation.

      The downside to file and suspend is if you are participating (contributing to) an HSA plan, when you file and suspend you will be enrolled for Medicare, which disallows your ability to contribute to the HSA plan any longer.

      jb

      • Thank you, but I’m still a little confused. I’m 66, on Medicare, but not yet drawing Social Security. Still working. Good health.

        My wife, still working, is 58, so she’s still years away from Social Security and Medicare. She has an HSA. Good health.

        Everything I read about file and suspend gives me the impression that we should act fast and take advantage of it… but I’m still not sure what we have to gain.

        • As I said, the only advantage that you have is to enable a future decision to retroactively receive benefits from your suspend date up to the date you make the decision.

          In other words, if you suspend now, and then at age 68 you change your mind about it, you can receive the two years’ worth of benefits in a lump sum and then continue receiving benefits at the age 66 level from then on.

          Otherwise there is no benefit to file & suspend for your particular situation.

      • Thank you, but I’m still a little confused. I’m 66, on Medicare, but not yet drawing Social Security. Still working. Good health.

        My wife, still working, is 58, so she’s still years away from Social Security and Medicare. She has an HSA. Good health.

        Everything I read about file and suspend gives me the impression that we should act fast and take advantage of it… but I’m still not sure what we have to gain.

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