As a working American, you might be interested in how Social Security benefits work; if you've ever been married, you might also want to know how Social Security spousal benefits work. The way these benefits are calculated and distributed can be straightforward, but Social Security benefits for spouses have recently changed. Here's how the new Social Security spousal benefit rules work and how spousal benefits are calculated, so you can maximize your Social Security benefit.
'Deemed Filing' for Retirement Benefits Has Been Extended
The Social Security Administration previously allowed some married individuals to receive spousal Social Security benefits at full retirement age, delay their own retirement and grow their full benefit amount. The SSA also allowed an individual to apply for benefits at his full retirement age and suspend his payments, which enabled his spouse to collect a spousal benefit while he did not collect his own. That individual could then restart his retirement benefits at his full retirement age and still be entitled to regular increases while they were put on hold.
Those two SSA loopholes that a married couple could use were restricted by the Bipartisan Budget Bill passed in 2015 and are no longer available.
Previously, if you were eligible for retirement and Social Security spousal benefits, you had to apply for both benefits if you were not at full retirement age; you would then receive the higher of the two. This restricting of an application is known as "deemed filing" because you are "deemed" to have applied for both benefits even if you only applied for one.
The new law ended that option by extending deemed filing to any retiree of full retirement age, which means that the Social Security Administration will automatically give the beneficiary the highest benefit. A higher earner who applies at full retirement age will no longer be able to collect a spousal benefit if his own retirement benefit is higher. He'll have to either collect his retirement benefit or delay benefits altogether. At the end of 2015, anyone age 62 or older at full retirement age was allowed to restrict an application to spousal benefits only.
Deemed Filing Exceptions
Deemed filing doesn't apply to Social Security survivor benefits. If you're a widower looking to apply for Social Security benefits for widows, you can likely take your survivor benefit separately from your retirement benefit. How are Social Security benefits calculated for a survivor? A survivor still qualifies for 100 percent of his late spouse's benefit. The applicant will be able to claim a survivor benefit first and let his own benefits grow until he reaches age 70. He can also take his own benefit early and claim a survivor benefit at full retirement age, according to Kiplinger.
Another exception to deemed filing includes those who receive spousal and disability benefits. For example, if you receive a spousal benefit because you're caring for a child under 16 or disabled, or if you receive spouse's benefits and are also entitled to disability, deemed filing doesn't apply to you; you're not required to file for your retirement benefit.
File-and-Suspend Rules Are More Strict
The file-and-suspend rule previously allowed an individual at full retirement age or older to apply for Social Security benefits and immediately suspend them so his spouse could collect spousal benefits. The individual could then restart benefit payments later and enjoy the increase he received each month the suspension lasted. But if you turned 62 on Jan. 2, 2016 or later, you can no longer collect a spousal payment and an individual payment at different points in time.
You can still voluntarily suspend your benefits at your full retirement age and receive more money for each month of suspension, but the new law states that if you suspend your benefits, you must suspend other related benefits. That means you would have to suspend your spousal benefit as well.
The new law applies to anyone who requests a suspension of benefits on or after April 30, 2016; or, 180 days after the new law was put into place. To request a suspension, you must have reached your full retirement age.
Why Spousal Benefit Rules Have Changed
Originally, the Social Security Administration paid spousal benefits only to the extent that they exceeded other benefits that the spouse earned. The rules have changed so that benefits can remain fair.
"The change in the law 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," according to the Social Security Administration.
More Social Security Changes in 2017
According to the Social Security Administration, more changes are coming to Social Security in 2017. Among these changes will be a small cost of living payment increase, a higher tax cap and increased earnings limits. However, there don't appear to be any more changes associated with spousal benefits planned, yet.
Retirement planning can be confusing, and you might have questions about your Social Security benefits. Questions such as "What is the maximum Social Security benefit I can get?" or "What Social Security benefits are widows entitled to?" might best be answered by a qualified financial professional.
If you think you're ready to apply for Social Security, make sure you have all the information you need to get your maximum Social Security benefit and ensure a stable financial future for your retirement years.