The Elimination of File and Suspend Couples Social Security Claiming Strategy – What You Need to Know

Daniel Penzing
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What Is the File and Suspend Claiming Strategy?

For years, if you got married after you filed for your own Social Security benefits, you could delay taking those benefits until you were 70 and claim a spousal benefit – usually 50% of your spouse’s benefits. The various spousal benefits, including 50% of your spouse’s Social Security benefit, made it beneficial to delay starting your own benefits until you could claim spousal benefits. That way, you could maximize the total benefits you received.

This system, called the file-and-suspend claiming strategy, was designed to relieve some of the financial impact of more than one person collecting a Social Security benefit based upon the employment earnings of one person. The rule had the benefit of helping people to strategically manage their Social Security claiming decisions based on the needs of the family without significantly expanding the Social Security program. But occasionally, someone would take advantage of the file-and-suspend claiming strategy in a way Congress never intended.

What’s Changing?

The Social Security Administration (SSA) is eliminating the ability for workers to apply for Social Security Benefits on a future filing date that’s different from their full retirement date. This change means that workers will no longer be able to delay their full retirement in order to get a higher monthly benefit.

Before this change, if a worker was married and in a file and suspend strategy, the worker’s spouse could choose whether they would get their own Social Security benefits or the worker’s reduced benefit. This strategy also allowed the worker to collect a spousal benefit instead of their own delayed retirement benefits. In the case of a divorce, the worker’s former spouse would also have the option to switch from the worker’s reduced benefit to their own unreduced benefits.

This tactic was useful when the time came to switch from spousal benefits to a full filing and retirement benefit. But, if the spouse dies before full retirement age, the former spouse would not be able to switch to their own unreduced benefit. That’s why some workers applied for Social Security early and then suspended their benefits later when they reached full retirement age.

Who Can Still Take Advantage?

If you’re over the age of full retirement age, are retired, and have your retirement benefits set to begin in a few years, then you can still take advantage of the File and Suspend strategy for claiming your Social Security benefits strategically. It’s true that the Social Security Administration stopped accepting new applications for this strategy, but it will still be available for those who are currently receiving benefits. That’s right…if you’re expecting your retirement benefits in the next few years, then you can still use this strategy.

In fact, if you’re working today and you’re receiving benefits, you can still take advantage of the File and Suspend strategy, and defer benefiting from your Social Security benefits. The only difference with this strategy than when it was first created is that those who are applying for it today will not be able to suspend it once they reach their full retirement age.

You’ll just have to live with the monthly benefit checks you’ll receive while you’re still working. But if you ever decide to change your mind…you can start receiving a bigger monthly benefit check any time between ages 66 and 70.

Impact on Divorcees

The Department of Treasury and the Social Security Administration has made changes to eliminate the ability of those who are divorced to file for File and Suspend Social Security retirement benefits. These individuals must file a restricted application based on the spouse’s record.

Impact on Widows and Widowers

What now?

The Social Security Administration (SSA) announced in September that it would remain on the path set in 2010 and curtail its file and suspend strategy, a move that took a lot of contemporary retirees by surprise … or shined a spotlight on a strategy they had never even considered. For many, the strategy was simply too complicated to carry out successfully and did not really help them meet their Social Security claiming needs. And for others, it did not turn out as planned.

The file and suspend strategy allows one spouse to file for his or her own retirement benefit when he or she reaches full retirement age and then receive the payment. Then, the spouse can defer receiving a spousal or survivor benefit until age 70. This allows one spouse to get the maximum amount of retirement in the meantime. If the spouse dies, the surviving spouse can then receive up to 100% of the higher spouse’s benefit.

The strategy seemed perfect for many married couples since it protected the higher earner or wage earner. There were two reasons for this. There was a one-time break in benefits and the retirement benefits were based on the wage earner’s earnings. So, it allows the other spouse to receive the maximum benefit when their own retirement benefit eventually starts. Some retirees preferred this option to its more simplistic counterpart – waiting until age 70 to get the maximum amount.

Summary

The Social Security Administration (SSA) has announced that it will stop allowing employees to claim spousal benefits on their old-age social security benefits even before their own retirement benefits are due to begin. The current regulation allows married individuals to claim spousal benefits for up to two years while their retirement benefits are continued, and then when their retirement benefits are due, the benefits can be switched to a higher benefit amount.

This change in the regulations has the potential to affect couples who are filing or claiming their social security benefits. Couples who depend upon this strategy to maximize their benefits before filing for their own retirement benefits may need to find a new strategy.