The budget bill passed late last year was great news for those who receive Social Security Disability Insurance (SSDI). The SSDI Trust Fund was depleted to a point where beneficiaries were set to see a 20 percent reduction in benefits, but a transfer of funds from the Old Age and Survivors Insurance (OASI) Trust Fund ensured that the SSDI Trust Fund would be able to meet 100 percent of payment obligations for several more years to come. Although this is good news for SSDI recipients, other changes to Social Security, as part of the measure, are not as positive.
One tactic many people who reached full retirement age used to maximize retirement benefits was to file for benefits at full retirement age, but suspend payments. There are a couple of reasons Americans used this strategy. Most of the people who used this strategy would either continue to work past full retirement age or did not need Social Security benefits now. If they filed and suspended benefits they would be allowed to collect a lump sum payment from the period of time they reached full retirement age until the time they started receiving monthly benefits. Those who file and suspend could wait until age 70 to start collecting monthly benefits. As of May 1, 2016 there will no longer be a possibility to collect lump sum benefits for the period between full retirement age and when the person decides to collect monthly benefits.
Another reason people would choose to file and suspend benefits is that by doing so a spouse could collect benefits on the spouse’s record during the time the person filing decided to suspend benefits. This will no longer be allowed any longer as of May 1, 2016 either. A spouse will not be allowed to collect benefits on the record of a person who is not actively collecting benefits themselves. The moves are being made to save money for Social Security and it is unclear whether Social Security actually ever intended the retirement program file and suspend rule to be used as they were being used. For more information about these changes click here.
