What the "loophole" was and why it no longer works

The Social Security spousal benefits loophole refers to a filing strategy that allowed certain people born before January 2, 1954, to claim spousal benefits first while letting their own retirement benefit grow. Under the old rules, you could file for spousal benefits at your full retirement age and receive roughly half of what your spouse was may have access to to — then switch to your own higher benefit later at age 70. This meant you could collect spousal payments for several years while your own benefit accumulated delayed credits, which increased it by roughly 8 percent per year.

The Bipartisan Budget Act of 2015 closed this strategy for anyone born on or after January 2, 1954. If you were born after that date, you can no longer file for spousal benefits alone and delay your own benefit. When you file for any Social Security benefit, you are now deemed to file for all benefits you are may have access to to at that time. The strategy still exists for people born before January 2, 1954, but the window to use it has passed for most workers.

Key Takeaways

  • The spousal benefits loophole allowed people born before January 2, 1954, to claim spousal benefits at full retirement age while delaying their own benefit until age 70.
  • The Bipartisan Budget Act of 2015 eliminated this strategy for anyone born on or after January 2, 1954, by requiring you to file for all benefits at once.
  • If you were born before January 2, 1954, and are at or near full retirement age, you may still be able to use this strategy, but timing and your spouse's filing status matter.
  • Social Security calculates your benefit based on your earnings record, so delaying your own benefit increases what you receive, even if you cannot use the old loophole.

Who could use the loophole and when

The loophole worked only for people born before January 2, 1954, and only if they had reached their full retirement age. Full retirement age varies by birth year — for someone born in 1953, it is 66 and 2 months. You had to be married, and your spouse had to have already filed for Social Security benefits (or be at least 62 and willing to file).

The strategy required filing for spousal benefits while your own benefit was still growing. Spousal benefits are calculated as roughly 50 percent of what your spouse receives at their full retirement age, though the exact amount depends on when your spouse filed and what they receive. By claiming spousal benefits first, you could receive a steady payment while your own benefit increased by 8 percent per year until age 70.

The advantage was largest for people with high lifetime earnings who could afford to delay their own benefit. Someone with a high earnings record could receive spousal payments for several years, then switch to a much larger benefit at 70. People with lower earnings records saw less advantage because the difference between their own benefit and the spousal benefit was smaller.

How the 2015 law change works

The Bipartisan Budget Act of 2015 introduced "deemed filing," which means that when you file for any Social Security benefit, the Social Security Administration automatically files you for all benefits you are may have access to to receive. You no longer have the option to file for one benefit and delay another.

If you were born on or after January 2, 1954, and you file for spousal benefits at your full retirement age, you are automatically filed for your own retirement benefit at the same time. Social Security then pays you the higher of the two amounts. This eliminates the ability to collect spousal payments while your own benefit grows.

The law did include a grandfather clause: people born before January 2, 1954, can still use the old rules if they have not yet filed for benefits. However, they must file before the important date passes, and they must meet all the other conditions — reaching full retirement age and having a spouse who has filed or is may be able to access to file.

What people born before 1954 can still do

If you were born before January 2, 1954, and have not yet filed for Social Security, you may still be able to use the spousal benefits strategy. You must be at or past your full retirement age, and your spouse must have filed for benefits or be at least 62 and willing to file.

To use this strategy, you would file for spousal benefits only at your full retirement age. Social Security will not automatically file you for your own retirement benefit if you specifically request spousal benefits only and you were born before the January 2, 1954, cutoff. Your own benefit continues to grow at 8 percent per year until age 70, when you can switch to it.

The timing matters. If your spouse has not yet filed, they must file before you can claim spousal benefits. If you wait past your full retirement age to file, you may miss the window to use this strategy, because Social Security's rules about deemed filing can change based on when you actually file. Speaking with a Social Security representative before you file is important if you think you might may have access to for this strategy.

How spousal benefits are calculated

Spousal benefits are based on your spouse's Primary Insurance Amount, which is the benefit your spouse receives at their full retirement age. If your spouse is receiving benefits, you can see their Primary Insurance Amount on their Social Security statement or by calling Social Security.

Your spousal benefit is roughly 50 percent of your spouse's Primary Insurance Amount, but not exactly. The exact percentage depends on your age when you file. If you file at your full retirement age, you receive approximately 50 percent. If you file before your full retirement age, the amount is reduced. If you file after your full retirement age, it does not increase — spousal benefits do not earn delayed credits the way your own retirement benefit does.

Your own retirement benefit is based entirely on your earnings record. The longer you delay filing, the larger it becomes. At age 70, your benefit reaches its maximum. This is why the old loophole was valuable: you could receive a steady spousal payment while your own benefit grew to its maximum.

What happens if you file before your full retirement age

If you were born before January 2, 1954, but you file for benefits before reaching your full retirement age, deemed filing applies to you. You cannot use the spousal benefits strategy if you file early. Social Security will file you for all benefits at once and pay you the higher amount, reduced for your age.

Filing before your full retirement age also permanently reduces your benefit. The reduction is roughly 6.67 percent per year for the first three years you file early, and 5 percent per year for each year before that. If your full retirement age is 66 and you file at 62, your benefit is reduced by about 25 percent for life.

This is why the loophole was only useful for people who could wait until their full retirement age. Filing early closes the door to the strategy and locks in a smaller benefit permanently.

Alternatives if the loophole does not explore to you

If you were born on or after January 2, 1954, you cannot use the spousal benefits loophole. However, you still have choices about when to file that affect how much you receive.

Delaying your own benefit until age 70 is still the most powerful tool available. Every year you delay past your full retirement age, your benefit grows by roughly 8 percent. If your full retirement age is 67 and you delay until 70, your benefit is roughly 24 percent larger than it would be at 67. This increase is permanent and applies to any survivor benefits your family receives if you pass away.

If you are married, you and your spouse can coordinate your filing dates to maximize household benefits. For example, the higher-earning spouse might delay until 70 while the lower-earning spouse files earlier. This strategy does not involve the loophole, but it still results in a larger total benefit for the household over time.

Frequently Asked Questions

Can I still use the spousal benefits loophole if I was born in 1953?

It depends on your exact birth date. If you were born before January 2, 1954, you may still be able to use the strategy, but only if you have not yet filed for any Social Security benefit. You must reach your full retirement age and have a spouse who has filed or is may be able to access to file. Contact Social Security before you file to confirm you meet all the conditions.

What if my spouse has not filed for Social Security yet?

Your spouse must file for benefits before you can claim spousal benefits. If your spouse is at least 62, they can file. If they have not reached 62, you cannot use the spousal benefits strategy yet. Once your spouse files, you can then file for spousal benefits if you meet the other requirements.

Does delaying my benefit still make sense if I cannot use the loophole?

Yes. Delaying your benefit until age 70 increases it by roughly 8 percent per year, regardless of whether you can use the loophole. If you expect to live into your mid-80s or beyond, delaying usually results in more total benefits over your lifetime. The loophole was a bonus strategy, not the only reason to delay.

What is the difference between my Primary Insurance Amount and what I actually receive?

Your Primary Insurance Amount is your benefit at your full retirement age. If you file before your full retirement age, you receive less. If you file after your full retirement age, your benefit is larger. Spousal benefits are calculated as a percentage of your spouse's Primary Insurance Amount, not their actual payment.

Can I change my mind after I file for Social Security?

The rules for changing your filing decision depend on your age and how long ago you filed. If you filed within the last 12 months, you may be able to withdraw your process and file again later. If more than 12 months have passed, you generally cannot withdraw. Contact Social Security to discuss your specific situation.