As a result of the budget bill passed last week, two social security strategies that we've recommended to many clients over the years are no longer available or significantly limited.

The strategy involves one spouse filing an application for retirement benefits when he or she reaches full retirement age and immediately requesting that benefits be suspended, allowing his or her eligible spouse to file for spousal benefits. The file-and-suspend strategy has been most commonly used when one spouse has much lower lifetime earnings, and thus will receive a higher retirement benefit based on his or her spouse's earnings record rather than on his or her own earnings record.

In a provision labeled "closure of unintended loopholes," the legislation effectively eliminates this strategy--if an individual chooses to suspend retirement benefits, neither the individual nor his or her spouse can receive spousal benefits during the suspension period. This provision will be effective in six months and applies to new file-and-suspend claims. Those who are both eligible and have implemented the file-and-suspend strategy before the six-month period ends will not be affected by the change.

What do you need to do: If you are already 66 or will be turning 66 in the next 6 months and your plan includes a file-and-suspend strategy, you need to apply for benefits and suspend them before the six-month window closes.  If you are younger than 55 1/2 and file-and-suspend was previously a part of your plan, you'll want to update your plan.  You should expect that elimination of the strategy will reduce your plan's probability of success or require a reduction in planned spending to maintain the same probability of success.

Another strategy that has been used to potentially increase retirement income involves one spouse filing for spousal benefits first, then switching to his or her own higher retirement benefit later. If a spouse reaches full retirement age and is eligible for both a spousal benefit based on his or her spouse's earnings record and a retirement benefit based on his or her own earnings record, he or she could choose to file a restricted application for spousal benefits only, then delay applying for retirement benefits on his or her own earnings record (up until age 70) in order to earn delayed retirement credits.

It's important to note that those individuals with a restricted application for survivor benefits appear not to be affected by this change.

What you need to do: If your plan included use of a restricted application and you won't be 62 or older by the end of 2015, you'll also want to update your plan.  As with the elimination of the file-and-suspend strategy, you should expect that elimination of the restricted application strategy will reduce your plan's probability of success or require a reduction in planned spending to maintain the same probability of success.