The recently enacted budget and debt ceiling deal contained significant adjustments to several rules related to filing for Social Security benefits. In an effort to decrease spending, Section 831 of the new budget slashes benefits for certain groups, especially spouses, divorced spouses, women, and families with disabled children. Some experts have estimated that the changes are equivalent to a decrease of $50,000 in lifetime benefits for many retirees. One of the most alarming changes involves suspending benefits for those already receiving payments within six months, which has never occurred before. The deal also includes an elimination of some popular claiming strategies. Here are some of the most impactful changes:

Elimination of File and Suspend Claiming

The file and suspend claiming strategy will be eliminated within six months for those who have not yet attained full retirement age. This means that benefits now being received by spouses, divorced spouses or children of the claiming party, who has suspended his/her own benefits, will be eliminated until the claiming party starts taking his/her Social Security retirement benefit.

Suspended Filers May Have to File Early

Those who have filed for benefits and suspended their own payments in order to provide benefits for a spouse or a child will have to file for their own benefits immediately at permanently lower levels or lose the benefits for their family. Generally, taking benefits early reduces payments significantly, up to 50 percent in some cases, depending on age and when payments are started.

Deeming Extended

Deeming is the requirement that if you file to start taking your spousal benefit, you are forced to simultaneously take your own retirement benefit, effectively giving you the higher of the two. Currently, if you are at full retirement age, you may file for only your spousal benefit and let your own benefit keep accruing. However, the new bill eliminates deeming until age 70. This means that you would stop accruing your own benefit if you take any payments before age 70, permanently reducing your payments.

Spousal Benefits Slashed

Through the file and suspend strategy, ex-spouses and spouses who care for grown disabled children receive special Social Security benefits even if the claiming party is not taking their benefits. Under the new deal, payments to these spouses will end within six months. If this bill is signed, those who will see their Social Security checks stop are disproportionately women.

Parents of Disabled Children Forced to Take Lower Benefits

The rules of the new bill also eliminate the ability for parents of disabled children to obtain benefits for their child while letting their own benefits accrue. Within six months, workers with disabled children would be forced to start taking their own benefits at a permanently reduced rate or lose the payments for their children.

It is important that those approaching retirement that have not yet filed for benefits, or those who have recently filed using a File and Suspend strategy or a restricted application for spousal benefits, review their situation to determine the best benefit filing plan under the new rules. If you have questions or to better understand your Social Security benefits, call my office at 941-778-1900 or e-mail tom@breitercapital.com.

Tom Breiter is president of Breiter Capital Management, Inc., an Anna Maria based investment advisor. He can be reached at 778-1900. Some of the investment concepts highlighted in this column may carry the risk of loss of principal, and investors should determine appropriateness for their personal situation before investing. Visit www.breitercapital.com.