Social Security Changes: Are You Grandfathered In?

Image: Social Security Administration.

Recent changes to Social Security have stirred up a lot of debate, with critics are bemoaning the loss of the file-and-suspend strategy and the ability to file as a spouse first. Yet regardless of how you feel about the changes, one confusing aspect about the impending loss of these Social Security strategies is exactly when they will disappear -- and who will get grandfathered in and still be able to use them going forward.

Grandfathering: an unexpected break In the past, Social Security changes have often come with little warning at all and have taken effect immediately. That has left those who didn't take advantage of key strategies out of luck. For instance, back in 2011, the Social Security Administration eliminated the ability for those who had claimed Social Security benefits more than 12 months in the past to withdraw their previous application. This strategy had allowed people to get a "do-over" by paying back past benefits -- interest-free -- and then potentially refiling at a later date to get higher monthly payments going forward. The SSA didn't grandfather anyone or give a grace period, drawing criticism from those who had planned to take advantage of the provision at a later date.

With the latest Social Security changes, though, there are grandfathering provisions. They're different for each strategy, and they don't cover everyone. But they do cover a fairly broad set of circumstances that will give those who do qualify a considerable amount of flexibility in moving forward with their Social Security strategy.

File-and-suspend and the six month ruleFor the file and suspend strategy, the new law set a 180-day time limit from the date of passage of the law during which anyone who qualifies can start using the strategy. Anyone who has already filed and suspended or who does so within that time frame will be able to benefit from the strategy on an ongoing basis into the future. That 180-day period ends on April 30, 2016, effectively closing the door for those who want to initiate the strategy after that date.

To use the file-and-suspend strategy, you need to have reached full retirement age. If you won't reach your 66th birthday by next April, then you won't be grandfathered in. Technically speaking, you'll still be allowed to suspend your benefits after that date if you want, but if you do, then no one in your family will be able to receive family benefits based on your work record while your benefits are suspended.

For those who will be 66 or older by next April, the key is to make sure you get your benefits suspended in time. Only suspensions done before the deadline will avoid the negative consequences of the law change. If you suspend, however, then you open the door for family members to benefit well into the future.

Filing as a spouse first and the 62nd birthday ruleThe filing-as-a-spouse-first strategy is also disappearing, but its grandfathering provisions involve a much longer time period. Under current law, if you haven't reached full retirement age, then when you file a claim for spousal benefits, you're automatically deemed to have claimed your own retirement benefits as well. If you have reached full retirement age, however, you can make a restricted application to receive only your spousal benefits. That lets your own retirement benefit grow.

The new law extends the automatic deeming provision up to age 70, wiping out the benefit of a restricted application. It comes with a fairly generous grandfathering provision that applies to anyone who reaches age 62 by Dec. 31, 2015. Anyone who meets the age requirement on that date can file a restricted application at any time in the future, without anything similar to the 180-day provision of the file-and-suspend grandfathering clause applying.

The interesting thing about this grandfathering provision is that it covers something that might not happen for years. If you've just turned 62, then you wouldn't be able to take advantage of filing as a spouse first for nearly four years until you hit age 66. That gives those in their early 60s a lot of flexibility that the file-and-suspend grandfathering rules didn't.

Think fastThe grandfathering rules covering Social Security's recent changes don't necessarily require immediate action. Yet you can't afford to ignore them, because in some cases, you do need to do something to take advantage of the strategies before they disappear.

The article Social Security Changes: Are You Grandfathered In? originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.