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Social Security Spousal "File and Suspend" Ends April 30, 2016


social-security-benefits-2016-615.jpgAh, the good old days...when companies paid for their workers' retirement and married couples could cash in on larger spousal social security payments. Between the demise of traditional pensions and the higher age requirement for social security, it seems like we face an uphill battle when planning our retirement. And, now there's another bump in the road: the end of social security "file and suspend" for spousal benefits.

In November 2015, Congress passed the Bipartisan Budget Act, which eliminates a few social security windfalls the government considers loopholes. One of these was the "file and suspend" spousal benefit, which worked like this:

  1. At age 62, the day John is eligible to file for social security benefits, he files for benefits but suspends (or defers) the actual payments.

  2. By deferring payments, John takes advantage of delayed retirement credits, which increase his payments by 8% each year between his full retirement age and age 70.

  3. John's wife, Mary, files for and receives spousal social security benefits immediately, based on John's employment history.

  4. When Mary is eligible for her own social security benefits, she files and suspends her benefits to rack up delayed retirement credits, while collecting the spousal benefit she receives from John's work history.

  5. John and Mary both defer their payments until age 70, when they both receive benefit payments that are 32% higher than the payments would have been at full retirement age, due to the delayed retirement credits.

  6. By cashing in on the delayed retirement credits and spousal benefits, John and Mary pocket up to $60,000 more in lifetime benefits than they would have if they filed for benefits individually and did not defer payments.

With the passage of the Bipartisan Budget Act, it is no longer possible to file and suspend your own benefits while also receiving a spousal benefit. Individuals who turn(ed) 62 on or after January 2, 2016, must file and accept their own and any spousal benefits concurrently, meaning they can't collect spousal benefits while suspending their own benefits and earning delayed retirement credits.

For most of us, this change is unfortunate but unavoidable. However, people born on or before May 1, 1950, have the opportunity to use the spousal file and suspend method before the deadline of April 30, 2016. If you're in this group, consider your options and decide if the file and suspend strategy is a good move for you, then move quickly to file before the deadline!

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