The End of ‘file and Suspend’
Congress just put the kibosh on a Social Security “loophole” worth tens of thousands of dollars for some married couples, said Tara Siegel Bernard in The New York Times. The recent bipartisan budget deal eliminates the “file and suspend” strategy that allows individuals to collect spousal Social Security benefits while their own benefits continue to grow. Under the claiming strategy, one spouse files for Social Security benefits upon reaching retirement a ge but then immediately suspends the payouts. The other partner, usually the lower-earning one, can then draw spousal benefits while waiting to collect his or her own monthly payout, which grows 8 percent every year that benefits aren’t taken until age 70. Meanwhile, the spouse’s benefits that were suspended continue to increase as well. Using this strategy, some couples can increase their lifetime Social Security benefits anywhere from $10,000 to $60,000. But Congress has put an end to it, with new rules going into effect within the next six months.
“Married couples have no shortage of options for deciding when to collect Social Security benefits,” said Jonnelle Marte in The Washington Post. But under these new rules, retirees are eligible only for spousal benefits if their partner already collects Social Security. Another change Congress just made eliminates what’s known as a restricted application, in which retirees can receive spousal benefits first, and then switch to their full retirement benefits later on. If you’re married and in your 60s, “you’ll need to do some careful retirement planning, quickly,” said Sharon Epperson in CNBC.com. People already at full retirement age (66 and older) have until May 1 to take advantage of file and suspend. Retirees 62 or older by the end of this year can also elect to collect spousal benefits before taking their own Social Security.
“Even people decades away from retirement should pay close attention to how Congress just ended two lucrative ways of taking Social Security benefits,” said Liz Weston in Reuters.com. Though just 0.1 percent of all Social Security recipients took advantage of file and suspend, any dual-income couple could have benefited from the strategy. But it was increasingly seen as unfairly benefiting the wealthy—high earners could lock in more benefits with it—and so it came on the chopping block as a “loophole.” What’s notable is that while Congress usually phases in big Social Security changes over decades, this time it moved incredibly fast. However, don’t go claiming Social Security early, thinking you’ll “lock in” benefits if and when Congress makes more changes. Delaying benefits as long as possible is still the best way to maximize Social Security checks. “The moral of the story” is not to rely on any one claiming strategy to remain unchanged. “But that should not prompt you to make decisions that will leave you worse off.”
see also finance and business knowledge
