Social Security File-and-Suspend Option Ending in 2016

I hate to say I told you so (okay, I actually LOVE saying I told you so), but as I postulated in an earlier blog, the Social Security file-and-suspend option is going away for new filers after May 2, 2016.

The file-and-suspend option allows one spouse to file for his benefits at full retirement age but suspend receiving the actual checks.  The filer would wait until age 70 to receive a larger payout, but his/her spouse could then file for the spousal benefit and receive a check during the wait.  Eventually, the person receiving the spousal check could switch to his/her own work benefit.

The change, signed into law as part of a larger budget deal, means that the spouse can only choose on or the other benefit to claim:  spousal or his/her own.  He or she won’t be able to switch to a different benefit later on.

This benefit seemed mostly to benefit higher earning dual-career couples and not the poverty-line people that Social Security has always been intended to help.  Plus, if a bunch of couples do it, that would be expensive for an already strained system, so it’s not surprising that the option is being taken away.

If you are already using file-and-suspend, don’t panic.  Those who are already using the strategy or start before May 2016 will be grandfathered in.  There are other exceptions, as well.  A good Q&A is in this article from the Washington Post:  https://www.washingtonpost.com/news/get-there/wp/2015/11/09/what-you-need-to-know-about-the-lucrative-social-security-strategy-thats-going-away/

Also, the Social Security website has surprisingly articulate answers (better than talking to representatives sometimes) to common questions about benefits.  www.ssa.gov.

 

If these topics sound like they would be of interest to your employees, sales conference, or professional organization, contact me at 303-324-0014 or kristi@sullivanfinancialplanning.com for more information.

One comment

  1. Jack Mudry says:

    It appears that this strategy would not help my wife and I anyway. Even though I will reach full retirement age at 66 next April and, in theory, I could file and suspend, my wife will only be 58 at that point. I think that means that she couldn’t start getting any benefits until she’s 62. Is that true? That means that we would need to wait for 4 years until she is 62, and then she will be able to start receiving her benefit, although it will be reduced. In any event, my benefit will be growing, but that’s a long time to wait, and we may need the money sooner.
    Does this scenario make sense to you? Thank you—

    Jack

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