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  • December 7, 2015

In a closed door session at 3 am, two significant changes to Social Security were hidden in the fine print of the budget deal signed into law on November 2nd. There was no discussion and no prior notification. We woke up on November 3rd and found out that two strategies families have used to maximize their Social Security benefits were simply going away.

The first strategy that will be removed is known as File and Suspend.


This strategy has helped married couples take advantage of one spouse’s spousal benefits while the other maximizes his or her Social Security benefits. A spousal benefit is a Social Security payout to one spouse that is calculated based on the other spouse’s retirement benefits.

With the File and Suspend strategy, a married individual who has reached full retirement age files for Social Security benefits — thus allowing their spouse to begin taking their spousal benefits — and then suspends the collection of his or her own benefits. When the married individual suspends his or her own benefits, the spouse still receives a Social Security payout through the spousal benefit while that individual earns delayed retirement credits. Delayed retirement credits allow that individual’s retirement benefits to grow by roughly 8% per year until age 70, which maximizes the Social Security payout they would receive in the future.

How does the change affect us?


For people younger than age 66 on April 29, 2016, a spouse will only be able to receive benefits if that wage earner is also collecting his or her own benefits.

For people aged 66-70 on or before April 29, 2016, an individual must suspend benefits by April 29, 2016 if he or she would like the spouse to file for benefits while the wage earner’s benefits are suspended.

The second strategy that has changed is the Restricted Application for spousal benefits.


Commonly used in conjunction with File and Suspend, a Restricted Application for spousal benefit allows a married person to file at normal retirement age to receive the lesser spousal benefit and then allows the individual’s own benefit to increase by earning delayed retirement credits up to age 70. Then at age 70, the individual shifts to his or her own benefit.

How does the change affect us?


This restricted application strategy will not be available to anyone younger than age 62 on January 1, 2016. For those under this age limit, someone who is eligible for his/her own benefit plus a spousal benefit will generally only receive the greater of these two amounts.

The rules for divorced individuals are slightly different than for married couples. The rules are as follows:

To be eligible for spousal benefits, a divorced individual must be at least 62 years old and must meet three conditions:

  1. He/She must have been married for 10 years;
  2. He/She must not have remarried;
  3. He/She must have an ex-spouse who is at least 62 years old.

Under the new law, couples who have not been divorced for at least two years will be subject to the same new restrictions on the File and Suspend strategy as married couples. If younger than age 62 by January 1, 2016, ex-spouses will be prevented from filing a restricted application for spousal benefits. Finally, for those individuals who have been divorced for more than two years and are otherwise eligible for spousal benefits, their eligibility will not be affected by their ex-spouse’s decision to file, or not file, for Social Security benefits.

What is not changing?


The new law will not affect couples who currently use a File and Suspend strategy. An individual will still be able to suspend his/her own benefit payments and earn delayed retirement credits up to age 70. This will be especially useful for people who started to receive benefits and later want to stop benefit payments so they can earn delayed retirement credits.

Widows and widowers who are eligible for both a survivor benefit and their own benefit will still be able to file a restricted application and take the lower benefit first, then switch to the higher benefit later.

This means that someone who is eligible for a survivor benefit can claim that benefit as early as age 60, while waiting up to age 70 to switch to their own benefit. Conversely, if the survivor benefit is larger than their own benefit, they may take their own benefit as early as age 62 and switch to the survivor benefit at full retirement age.

So, what should you do now?


Those who are age 66 by April 29, 2016 should file for benefits and immediately suspend them in order to trigger benefits for a spouse or dependent child while your own benefit continues to grow by 8% up to age 70. Those who file and suspend will also retain the right to request a lump sum pay out of suspended benefits any time up to age 70.

Those who are 62 or older by December 31, 2015 will be permitted to claim spousal benefits at age 66 if their spouse has already filed and suspended before April 29, 2015.

Finally, for those of us who did not meet the 62 or older cutoff in 2015, we will be forced to file for both our individual benefits and spousal benefits at the same time and receive the higher of the two, but not both, due to the termination of the File and Suspend strategy. For married couples, that means that the spousal benefit, which is often smaller than a retirement benefit, will never be paid.


With the end of the year fast approaching and the recent changes to Social Security, our team is ready to help you implement strategies to help improve your tax situation. However, December 31st, is right around the corner, so if we can be of assistance, don’t hesitate to reach out to our Director of Wealth Planning, Melissa Montgomery-Fitzsimmons, at 303.531.8100 or contact your relationship manager to discuss your year-end planning strategies.



Investment and insurance products and services are not a deposit, are not FDIC insured, are not insured by any federal government agency, are not guaranteed by the bank, and may go down in value.

First Western Trust cannot provide tax advice. Please consult your advisor for how the information contained within may apply to your specific situation.