A new budget agreement reached by the White House and congressional leaders contains potentially bad news for Social Security recipients.

As part of cost-cutting measures, the bill puts an end to two popular filing strategies. One of the strategies allows a Social Security claimant to file for benefits and then suspend them while collecting benefits for a spouse. This approach is often used to increase lifetime payout amounts. Many of you learned of this strategy during my webinar on Social Security planning. To learn of the Social Security planning strategy that you are potentially at risk, you can replay the webinar, “Maximize Your Social Security Benefits” here.

The agreement also restricts claims for spousal benefits. Both changes would affect people who turn 62 in 2016 or later.

In addition, the bill proposes adding a surcharge on high-income recipients of Medicare.

This agreement was negotiated behind closed doors, and the bill was only published a few days ago. The House of Representative could vote on the measure today (October 29, 2015), and the Senate tomorrow (October 30, 2015).

While time is short, opponents of these changes are urging families to call and e-mail their elected Congress and Senate representatives to insist that they be rejected.

If the budget bill is passed in its current form, the Social Security changes will go into effect quickly. Payments received by those using the file-and-suspend strategy will end within six months.

That will create a difficult choice for these families: If they un-suspend the higher wage earner’s benefit immediately, the benefit amount available to his or her survivor will be permanently reduced. If the higher wage earner keeps their benefit suspended, the spouse’s checks will stop.

The other strategy that the bill would curtail is known as “restricted application for spousal benefits.” This takes place when a person of full retirement age (66 or 67 depending on your birth date) applies for spousal benefits only and delays their own benefits. The delayed benefits then grow 8% per year. This strategy is often used in tandem with the file-and-suspend strategy.

The changes are of particular concern for those retirees and soon-to-be retirees who have already incorporated the affected claiming strategies into their retirement income planning. The budget bill throws a wrench into those folks’ plans.

For more details, see this article. In the meantime, we hope the government’s unexpected Social Security changes drive home the importance of creating a proper plan for retirement—one that is flexible enough to withstand surprises of this sort. Please contact us if you would like to discuss retirement planning options or how these changes will affect your current plans.