April 20, 2016
In November, 2015 a new law was enacted that closed a long time tactic within the Social Security system popularly known as the File and Suspend strategy. With this method, a spouse could receive spousal benefits while the other spouse takes advantage of a provision that allowed his or her monthly Social Security to grow.
For example, a husband could file a claim for Social Security and immediately suspend his or her payments, which opened the door for his wife to claim spousal benefits. By suspending his payments, the husband’s monthly benefit would continue to receive an annual increase until he ends the suspension or reached age 70. Experts suggest that under this strategy from age 66 to 70 one would get what essentially amounts to an 8 percent increase in monthly payment amounts each year the benefits are delayed. Of course, for a married couple, spousal benefits are only applicable once a Social Security claim has been filed.
In a posting to its web site in late February, 2016 the Social Security Administration pointed out the interpretation of the new claiming rules enacted last November.
As of April 30, 2016 no one younger than 62 at the end of 2015 can avoid the agency’s deeming rules, which means they cannot claim only one benefit at a time. Thus no longer can one spouse file for spousal benefits and the other spouse file and suspend his or her retirement benefit at full benefit age.
Those who will not be affected by the rule change would appear to be: (A) Anyone who has already claimed benefits before April 30. If one submits a request by that date, and their spouse or children become entitled to benefits either before or after that date, they will not be cut off by the new rules and will continue to receive payments; (B) Anyone who will reach full retirement age (66 right now) on or before April 29, 2016 will continue to be able to use the File and Suspend strategy; and (C) Anyone who was 62 or older as of January 1, 2016 will be able to continue to file a restricted application at his or her full retirement age for just their spousal benefit, while deferring their own retirement benefits. They will not be subject to the agency’s new deeming rules.
File and Suspend is still part of Social Security but it is limited to the worker only, of those 66 and younger after that May 1, 2016. After that the File and Suspend strategy will allow a worker who had started receiving benefits to suspend those benefits to accrue delayed retirement benefits from that point until the worker begins benefits again, up to age 70. Suspending benefits for a worker will now suspend benefits for everyone involved not just the worker. A spouse and/or qualifying children will be allowed to collect a social security benefit on a worker’s record only when that worker himself or herself is actually receiving benefits.
Those readers who are couples and in the age group eligible for and considering applying for social Security benefits should consult their advisers as soon as possible because April 30, 2016 rapidly approaches.
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