File-and-Suspend Social Security Strategy Killed by Congress

For many seniors, deciding when to file for Social Security benefits is a serious decision that has long-reaching financial implications. Since 2000, it’s been possible for those who had started receiving their benefits to voluntarily suspend them.

With the introduction of these rules, a few Social Security income strategies evolved. One of them was to file for benefits and then almost immediately ask for a suspension. This tactic also includes a way for spouses to file for spousal benefits. As a result, you could suspend your benefits while building up delayed retirement credits, but your spouse could receive benefits.

Recently, this strategy was dubbed “claim now, claim more later,” and was one of the priority targets of the Obama Administration when submitting its budget proposal for FY2015. Now, thanks to the 2015 budget legislation currently in Congress, the loopholes associated with the suspension of Social Security benefits are being closed.

Now, when you file to suspend your Social Security benefits and start looking to build your delayed retirement credits, all other benefits based on your earnings record will also be suspended. This means that spousal benefits and other dependent benefits are suspended at the same time you suspend your own benefits. No more receiving these payments while you continue to accumulate delayed retirement credits.

The new rules are meant to apply starting in six months. Those currently engaged in file-and-suspend tactics will be grandfathered in.

The legislation that made file-and-suspend possible in 2000 wasn’t necessary designed to make it easy for retirees to manage their benefits in this way. However, the Social Security Administration made it easy to apply these strategies by offering Restricted Applications for benefits. This made it possible to file for spousal benefits and avoid filing for retirement benefits, without the strict need for suspend-and-file.

With changes to the legislation, this is no longer possible. Like the file-and-suspend strategy to at least get spousal benefits while building credits, the Restricted Application strategy is being eliminated. The Social Security Administration will no longer make it easy to apply for spousal benefits without receiving your retirement benefits. It’s estimated that this move will save as much as $9.5 billion in the payout of additional benefits.


Not only that, but there is a change to which benefits you’re deemed to have applied for. In the past, those applying for early benefits is assumed to have applied for all eligible benefits. This means that applying early meant that you had to receive a check for what paid more, either your individual benefits or the spousal benefits.

However, those who waited until full retirement age could cherry-pick a little bit regarding which benefits to apply for. This meant it was possible to apply for your spousal benefit, but wait on the individual benefit (delaying and building delayed retirement credits), and vice versa. This ability allowed some to carefully orchestrate the timing of their Social Security benefits with spouses, and figure out the most effective way to increase payouts at opportune times.

The new legislation eliminates this ability. Now, no matter your age, if you apply for any benefits, you have applied for all of your benefits. This doesn’t just apply to those going for early benefits anymore. As a result, once you apply for your spousal benefit, you are actually applying for your own individual retirement benefit as well.

These changes are likely to affect the way you plan your retirement income going forward. Before you decide when and how to apply for your Social Security benefits, review the latest legislation and consult with a knowledgeable financial planning professional. The way you approach retirement requires you take the latest developments into account for best results.

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