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Social Security Restricted Application:

Josh Beachler June 02, 2021

In 2015 Congress passed the “Bipartisan Budget Act of 2015” which discontinued certain “enhanced strategies” that had previously allowed individual taxpayers to select alternative payout strategies.  This new law was designed to eliminate government payouts that exceeded actuary projections, and taxpayers no longer had the opportunity to optimize benefit strategies . . . or so we thought.

The enhanced strategies included restricted applications, along with file and suspend.  These options effectively allowed married couples to obtain additional income above what each taxpayer may have been entitled to as an individual, based on different elections.

Many articles over the course of the past six years proclaimed that these strategies were no longer available, but this is not entirely true.  While file and suspend was discontinued, restricted application strategies may still provide an opportunity for some.  If a taxpayer turned age 62 before January 2016, they are grandfathered into the old rules.

A restricted application allows an individual to claim spousal benefits without claiming their own benefits.  This allows the individual to receive income based on their spouse’s record while deferring their own benefit.  Claiming spousal benefits allows individual benefits to increase at a linear rate of 8% for every year of deferral past full retirement age (FRA) – until a maximum of age 70.

Taxpayers who turn 62 after 2016 are subject to what is known as the deemed filing rule.  This means that when a taxpayer files for benefits, they are simply filing for the highest benefit available to them at that time. No longer are taxpayers allowed to select spousal versus individual.  It is all or nothing.

Practically speaking, the window for eligible taxpayers to take advantage of their grandfathered status is shrinking.  Currently, only those taxpayers between the ages of 68-70 could submit restricted applications and only if they have not already filed for social security benefits.

These taxpayers for whom restricted application strategies may still be available should reach out to their CCP advisor to explore the possibilities.  Ultimately the Social Security Administration will access individual records and confirm the taxpayer’s status.

While the window may be small, eligible taxpayers could potentially enhance their Social Security benefit by as much as a few hundred dollars a month.

Josh Beachler

disclosure

THIS COMMENTARY HAS BEEN PREPARED BY CLEARWATER CAPITAL PARTNERS. THE OPINIONS VOICED IN THIS MATERIAL ARE FOR GENERAL INFORMATION ONLY AND ARE NOT INTENDED TO PROVIDE OR BE CONSTRUED AS PROVIDING LEGAL, ACCOUNTING, OR SPECIFIC INVESTMENT ADVICE OR RECOMMENDATIONS FOR ANY INDIVIDUAL. ALL ECONOMIC DATA IS DERIVED FROM PUBLIC SOURCES BELIEVED TO BE RELIABLE. TO DETERMINE WHICH INVESTMENTS MAY BE APPROPRIATE FOR YOU, PLEASE CONSULT WITH US PRIOR TO INVESTING. INVESTING INVOLVES RISK WHICH MAY INCLUDE LOSS OF PRINCIPAL.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities, insurance products, or to adopt any investment strategy. The opinions expressed are as of the date of writing and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Clearwater Capital Partners to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. S&P 500 is a registered trademark of Standard & Poor’s Financial Services, a division of S&P Global (“S&P”)  DOW JONES, DJ, DJIA and DOW JONES INDUSTRIAL AVERAGE are registered trademarks of Dow Jones Trademark Holdings (“Dow Jones”). The two main risks related to fixed-income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments.

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