The deadline of Friday, April 29th for the popular File and Suspend Social Security strategy is rapidly approaching. In this article, I’ll cover why this is important, and if you haven’t already taken action, why you should if the deadline applies to you.
A new law (as part of the Bi-Partisan Budget Bill of 2015) was passed in November that eliminates two popular Social Security strategies; as a result, you may need to change your thinking of how and when to claim your Social Security.
As I said, the deadline for the first strategy to be eliminated is April 29, 2016; and, even those who have already claimed can be impacted, unless you are over 70 years old.
Social Security claiming strategies have gained in popularity in recent years. More Americans have recognized that they can receive more in Social Security benefits by making smarter decisions on how and when to collect their Social Security, vs. simply claiming benefits at 62, 66, 70 or somewhere in-between.
File and Suspend is Closing Fast
Strategy #1: File and Suspend
The Strategy: Using the File and Suspend strategy, one member of a couple (usually the higher earner) claims benefits and immediately suspends them. This gives his or her spouse the ability to start claiming a spousal benefit, while the benefit of the spouse who filed and suspended continues to grow at 8% per year (while the benefit is suspended), up until age 70. This increases not only the benefit payable when it is resumed, but also increases the eventual survivor benefit payable to the lower-earning spouse.
The Change: Under the new law, when an individual suspends his or her own benefits, all benefits payable, including those payable to a spouse or other dependents, will also be suspended. The new law also eliminates the ability to request a lump-sum benefit back to the date of when benefits were suspended.
Why This is Important & What’s Happening: Basically, if you don’t take advantage of this strategy by the deadline, the ability to have a spouse claim a spousal benefit, while the primary filer also receives Delayed Retirement Credits, is going away. Failing to take advantage of this strategy can cost many couples $50k to $60k in lifetime benefits…or more than $120k when combined with a Restricted Application strategy.
Important Deadlines: Those who are receiving benefits already under this strategy will continue to receive them. For those who are not, they must be at least 66, and must file by April 29th, 2016. Those who are either already implementing this strategy or filing and suspending before April 29th, 2016 will continue to fall under the old rules until they reach 70 or resume benefits. Those who request to suspend after the April 29th, 2016, deadline will be subject to the new rules.
What You Should Do: If either you or your spouse are going to be 66 or older by April 29th, 2016 you need to pay very close attention and carefully consider your options. You may even want to talk to an expert.
Editor’s Note: The 5 Social Security Loopholes left open by Congress
Singles: All singles 66 and over by April 29th, 2016 should highly consider and evaluate filing and suspending in order to preserve the option to receive a lump-sum benefit at a later date. This will no longer be possible after the April 29th, 2016 deadline.
Married Couples: All married couples with at least one spouse age 66 to 70, need to consider whether it would be beneficial to file and suspend by the April 29th, 2016 deadline in order to preserve their options and Social Security strategies available to them to maximize their benefits. Married couples have the most to lose by failing to consider these strategies prior to the deadline.
Divorced: All divorced individuals 66 and over by April 29th, 2016 should highly consider and evaluate filing and suspending in order to preserve the option to receive a lump-sum benefit at a later date. This will no longer be possible after the April 29th, 2016 deadline.
Survivors: Interestingly, survivors are unaffected by this new legislation and will continue to have the same options available to them going forward. Survivors should carefully consider their Social Security options because they can be eligible for benefits on one record while continuing to accrue Delayed Retirement Credits and claim on the other record at a later date.
The Bottom Line
Whether any of the strategies above are right for you requires careful analysis, as each situation is different.
Working with a knowledgeable Social Security advisor, such as the service offered by SocialSecurityAdvisors.com, is highly recommended given the complexity of the rules. Knowing what to do, and when to do it, is critical when determining how best to maximize your Social Security.
Until Next Time,
Matthew Allen is Co-Founder/CEO of Social Security Advisors. He has been helping seniors Maximize Their Social Security for over a decade. In addition to co-founding Social Security Advisors, Matthew also founded The Universal Group of Companies, a private investment firm, in 2004. From 2000 to 2004, Matthew was a NYSE Market Maker with LaBranche & Co., a Fortune 500 New York Stock Exchange firm.