If you haven’t yet filed for your Social Security benefits — and you will be 66 or older by April 29 — you need to know about recent changes, and you need to ACT FAST!
Last year, Congress voted to limit the advantages of the “file-and-suspend” strategy, an option used by many married workers to maximize Social Security payouts. If you’ll be 66 or older by April 29, you have until that date to lock in all the advantages of the file-and-suspend strategy. This frequently used option has been labeled as an unintended loophole and will be discontinued.
Who Can Benefit?
Workers who are or will be 66 (full retirement age [FRA]) by April 29 and have not already used file-and-suspend.
Married couples who want to delay Social Security after FRA, but want a spousal income in the meantime.
What Is File-and-Suspend?
Under the soon-to-be-expired rules, a worker who has reached FRA can file for Social Security benefits, which then makes the benefit available to his or her spouse as well. The filer can then suspend his or her Social Security income benefit up to age 70 in order to accumulate delayed retirement credits (DRCs) and therefore increase the benefit amount by 8 percent per year of delay.
Meanwhile, as the benefit is in suspension and growing for the filer, the spouse (who must be FRA to receive 50 percent of the filer benefits) can receive 50 percent of the benefit during the period of suspension. This also offers a potentially higher benefit for surviving spouses, who can then be eligible for 100 percent of the deceased spouse’s benefit amount, including the 8-percent annual increase via delayed retirement credits.
After April 29, workers will still be able to file-and-suspend their own benefits (if they left and returned to work for instance). However, Social Security benefits will not be available to a spouse while the worker has suspended his or her own benefits.
What Should You Do Now?
If you are eligible, and you file by April 29, you will still be allowed to file and suspend IF: (1) you are entitled to Social Security; and (2) you are (or were) married to someone who has filed for Social Security. In the latter case, you will be able to collect an amount equal to 50 percent of your spouse’s (or ex-spouse’s) benefit while you suspend your own benefit to keep that growing at 8 percent annually until age 70.
Former spouses (in a marriage that lasted for at least 10 years), who are at least 62 and have not remarried, can collect the 50-percent divorced-spouse benefit if their ex-spouse has filed or has reached FRA. However, after April 29, former spouses cannot receive 50 percent of the divorced-spouse benefit if the ex-spouse suspends. This makes a former spouse vulnerable to his or her ex’s decision to suspend; a nasty surprise for many no doubt.
NOTE: If you’ve already filed for Social Security and opted to file-and-suspend, you’re grandfathered in (pun intended). All the advantages of file-and-suspend will continue for you.
Bridget Burgess, CFP® is a client advisor at Laird Norton Wealth Management. With more than 30 years of experience in the securities and financial advisory sectors, Burgess strives to bring clarity and assurance to her clients’ financial lives.
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