Prior to 2016, the “file-and-suspend” Social Security strategy allowed spouses to collect an additional tens of thousands of dollars in Social Security benefits. But if you haven’t taken advantage of it yet, you’ll need to act fast! That’s because the Bipartisan Budget Act that the President signed into law late last year to avoid a government shutdown also included a section to end this strategy effective April 30, 2016.
The spousal strategy came into being in the year 2000 as part of the Senior Citizens Freedom to Work Act (P.L. 106-182.). It increased the Social Security claiming options for married couples with one spouse at full retirement age by allowing them to take advantage of spousal benefits and "delayed retirement credits" simultaneously.
The higher earning (i.e. lifetime earnings) spouse files for Social Security benefits upon reaching full retirement age (currently age 66), then immediately suspends them. At the same time, the lower earning spouse (again, lifetime earnings), aged between 66 and 69, files for spousal benefits (generally 50% of the spouse’s take) without touching his or her own benefits. By doing this, the lesser earning spouse can delay filing to collect their own benefits, allowing them to grow over time. They are able to put off collecting until age 70, resulting in a Social Security payout that is some 8% higher annually than it would have been if they had collected at age 66. The higher earning spouse's benefits also remain untouched so they, too, grow over time.
If you are age 66 or older before May 1, 2016, and your spouse is between the ages of 66 and 69, there is still an opportunity to get in under the old file-and-suspend system. There’s a potential $50,000-plus of benefits on the line! Even if you are not in that sweet-spot age range, think about your friends and relatives who may be and send them a link to this article.
Make an appointment immediately with your local Social Security office. Not sure where to start? Talk to a Kruggel Lawton tax accountant or other qualified financial professional who can look at how Social Security fits into your overall retirement plan and help you maximize your benefits. Additional details from the Social Security Administration can be found here.
Remember, the window on the file-and-suspend strategy closes on April 30, 2016. That’s right around the corner, so don’t wait!