By Scott Ford, founder and CEO of Cornerstone Wealth Management Group

Legislation was passed and signed into law by President Obama in late 2015 that eliminates several of the Social Security claiming strategies that had been previously employed by married couples. For this reason, it is imperative for married couples to do a complete analysis of their Social Security filing options immediately, before it is too late. The options being eliminated are explained below, including the deadlines for taking advantage of them. They are the file and suspend strategy, the lump sum option, and the restricted application.

The File & Suspend Strategy

One of the most popular filing strategies for couples with large differences in their earnings histories is referred to as file and suspend. This is a way for a lower earning spouse to begin collecting spousal benefits while the higher-earning spouse delays collecting so he or she may maximize their benefit amount. This is an effective strategy when the spousal benefit you are entitled to is greater than your own Social Security retirement benefit.

With the file and suspend strategy, the higher-earning spouse files for benefits, enabling their spouse to begin collecting spousal benefits. Then, they suspend their own retirement benefit so that they can continue accruing 8% per year for delaying. With file and suspend, couples are relieved of the dilemma of choosing between collecting spousal benefits immediately and waiting to collect a larger benefit in the future.

If you are part of a married couple where the higher earning spouse will be 66 by April 30, 2016 you still have time to take advantage of this filing strategy, but you must act quickly. You must file and request to suspend benefits by April 30 or forfeit this opportunity. As of May 1, 2016, spouses will not be able to collect benefits during the suspension and will instead be forced to choose between collecting spousal benefits and delaying the benefit earner’s retirement for a greater overall benefit.

The Lump Sum Option

Most people who file and suspend their benefits do so in order to accrue the additional 8% a year and have a higher monthly benefit later on. However, there is a second option that is being removed along with the file and suspend strategy. Historically, workers who filed for benefits and then suspended them could collect payments retroactively as a lump sum in lieu of a higher monthly payment for having delayed retirement.

This was a way for people to insure against sudden health or financial upsets. Someone could file for social security benefits at age 66 and then suspend them with the intent of gaining 32% by waiting until age 70. However, if they were surprised by a sudden illness at age 69, they had the option to forfeit the delayed credits accumulated and collect a lump sum equal to all of the payments they would have been getting since age 66 and also continue collecting their regular benefit.

The lump sum option will no longer be an option as of May 1, 2016. Those who suspend their benefits can choose to begin receiving them at any time and will get whatever increase they have earned for delaying their benefits, but they will not have the option of collecting a lump sum payment.

The Restricted Application

The final social security claiming strategy that is being terminated is the restricted application. Under current law, anyone who has reached their FRA can file to receive their spousal benefit while allowing their own personal benefit to continue growing until age 70. Their application is restricted so that they only receive the spousal benefit and not their own. This is a way for people to collect some benefit now while maximizing future benefits. The key is that you must have reached FRA in order to take advantage of this. If you file before reaching FRA, you will be given the greater of your own benefit or your spousal benefit; you will not be able to choose between the two.

The new legislation abolishes restrictions on applications. No longer can a worker choose which benefit they want to receive. No matter when you file, whether it is before or after you achieve FRA, you will be awarded the larger of either your personal or spousal benefit.

If you turned 62 on or before January 1, 2016, you are grandfathered in and still able to file a restricted application. The right to restrict your application no longer exists for those who turn 62 after January 1; they are subject to the new law. If you have been grandfathered in, though, a restricted application is not automatic. You still must wait until you are 66 to file and your spouse needs to have filed as well for you to be able to receive the spousal benefit.

Investing isn’t easy or simple, but sticking to a set of core guidelines can help us make better decisions and create strategies that can perform in a variety of market conditions. To learn more about how to maximize your lifetime social security benefits and whether you are eligible to file and suspend before April 30, 2016, please call our office at (301) 739-8505 or email me at [email protected].

This material presents a general overview of certain rules related to Social Security and is not individualized for your particular situation. For specific individualized tax or legal advice, consult with a qualified tax or legal advisor. This information is based on current law which can be changed at any time.

About Scott

Scott Ford, founder and CEO of Cornerstone Wealth Management Group and a Carson Institutional partner, serves on the investment committee as the technical strategist. He is a registered principal at LPL Financial and is a registered financial consultant. Scott is ranked in the top 1 percent of all LPL registered financial advisors based on annual production.

He was recognized as one of the 20 Rising Stars of Wealth Management by Private Asset Management Magazine in 2008 based upon assets managed of $1 million or more per client. Scott is the author of three books: The New York Times Bestseller, The Sustainable Edge, as well as Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances and The Widow’s Wealth Map: Six Steps to Beginning Again. Scott and his family reside in Hagerstown, Maryland.