It was announced on Tuesday that the House of Representatives passed a budget deal that is expected to move through the Senate largely unchanged and make it to the President’s desk in time to avoid a fiscal crisis and a possible government shut down.

Although that’s news unto itself, I was interested to see that this budget clamps down on two of the most popular Social Security maximizing strategies in existence today, known as ‘file and suspend’ and a ‘restricted application,’ which is also sometimes called ‘claim some now, claim more later.’

I wrote about this approach in more detail back in June, but the basic idea is that a high income earning spouse files for benefits at their full retirement age but then suspends the filing which allows the benefits to grow.  The lower earning spouse can claim spousal benefits at his or her own full retirement age and then shift to their own full benefit if it is larger.

Although the strategy has been allowed for 15 years, it wasn’t until a recently published book popularized the approach and the Center for Retirement Research estimated that the strategy added $9.5 billion in annual costs to Social Security.  About 100,000 people currently use these strategies according to the Center on Budget and Policy Priorities.

The restricted application, or ‘file some now, file more lately,’ is another strategy for couples.  Today, if someone applies for benefits between 62 and their full retirement age, they will receive the higher of their own benefit or a spousal benefit.

By waiting until full retirement to claim, the beneficiary had the opportunity to restrict an application to spousal benefits only, which allowed you to collect spousal benefits while allowing your own benefit to grow.

Although these changes aren’t yet law and are still subject to change, all of the accounts that I have read suggest that these optimization strategies are going away for those under age 62.  For those already engaged in these strategies or are intending to start in the next six months, you’re in the clear.

Obviously, we’ll have to see what shakes out in the final situation and what effects the new law will have on our clients.  Stay tuned…