Making the most of Social Security is a common goal, as it can mean a more comfortable retirement. For couples, the spousal benefits loophole was a popular way to maximize Social Security. However, it’s not a path that’s currently available. If you’re wondering what the loophole was or what happened to it, here’s what you need to know about the Social Security spousal benefits loophole.
What Is the Social Security Spousal Benefits Loophole?
The Social Security spousal benefits loophole essentially included specific techniques that allowed certain people to game the system. One example involved using a restricted application. With that, a working married spouse could apply for Social Security spousal benefits while letting their worker-related benefits continue to grow up to age 70. Then, they could later apply for worker benefits to receive a higher amount, even though they’d been receiving spousal benefits potentially for years.
Another version of the Social Security spousal benefits loophole involved voluntary suspensions. Essentially, a married person could claim their worker’s Social Security benefits, making their partner eligible for spousal benefits. Then, the worker’s spouse would suspend their Social Security benefits to allow them to grow (based on their increasing age), but their partner would continue to receive spousal benefits.
What Happened to The Social Security Spousal Benefits Loophole?
Generally, the Social Security spousal benefits loophole came to an end after the passage of the Bipartisan Budget Act of 2015. With that legislation, the restricted application loophole was essentially closed after 2023 came to a close. At this time, anyone who’s eligible for worker and spousal benefits is required to file for both simultaneously, so they can’t select just one or the other. Instead, they’ll automatically receive whichever benefit is higher based on their age and account status on their filing date.
When it comes to the voluntary suspension loophole, it was essentially closed on April 30, 2016. As of that date, spousal benefits (not including divorced spouse benefits) are only available if the worker spouse is actively collecting Social Security retirement benefits. That means if the worker’s spouse suspends their benefits, spousal benefits to their married partner are also suspended.
The reason these loopholes were closed is they were providing mechanisms for retirees to receive more Social Security benefits than were likely intended. As a result, legislation was passed to close up those options.
Voluntary Suspension Loophole
It’s critical to note that the change to the voluntary suspension loophole doesn’t impact divorced spouses. If a person qualifies for Social Security benefits due to their ex-partner being the worker in the equation, the ex-spouse suspending their benefits won’t impact the other partner’s access to spousal benefits if they qualified for them previously. That can prevent malicious benefits suspensions designed to stop a former partner’s benefits, as well as the unintentional ending of spousal benefits by the worker’s former partner who’s trying to act in their own best interest.
Do you think the Social Security spousal benefits loophole should have remained in place, or is it better that it’s closed? Share your thoughts in the comments below.
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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