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Can I File & Suspend My Social Security?

Tuesday, April 4, 2017

Sheila Jamison and Rich Jamison

The Bipartisan Budget Act of 2015 averted the threat of a government shutdown. However, in it Congress eliminated a long-time Social Security claiming strategy, called "file and suspend", as of April 30, 2016 to save money.

This strategy is history, but a related strategy, called "Restricted Application", is still available for a specific group of people. If you are in this group, you still have an option similar to file and suspend open to you.

How Does It Work?

Your full-retirement-age spouse must apply for and begin collecting retirement benefits. If you were born on January 1, 1954 or earlier, and are full retirement age or older, you can do a restricted application. That is, you apply for just the spousal benefit (you "restrict" your application to just that benefit) based on your spouse's work record. You can do this even if you could get a higher amount as your own retirement benefit. You then collect that benefit while you continue to build up Delayed Retirement Credits for your own retirement benefit when you eventually switch over to it.

Who Is Eligible?

If you were born on January 1, 1954, or earlier, and have reached full retirement age, you can do a restricted application and receive just spousal benefits. While you receive these, you delay your own retirement benefits. If you were born after Jan. 1, 1954, you cannot.

What If I’m Not Eligible?

It's back to basics. You’ll have to rely on traditional strategies that were in use before file and suspend. These include the all-important decision: When should two workers in a married couple take their Social Security benefits?

Those decisions are complex, involving the state of their health and the longevity histories of their families. Successful Social Security strategies often depend heavily on betting correctly on how long you'll live.

We feel that where the couple had average health, or at least one person has good health, the optimal strategy is typically for the higher earner to delay taking his/her benefits until as late as possible. The lower earner may decide to start as early as possible to, so to speak, hedge the bet of the other spouse’s delay. In short, delay makes sense if four criteria apply:

  • You plan to continue to work.
  • You do not need the income right away.
  • You are in good health.
  • You come from a family that lives to a ripe old age.

By postponing benefits as long as possible, high earners who are in good health will earn that Delayed Retirement Credits bonus and increase the size of the survivor benefit potentially payable to the spouse in the future. Living longer provides the time needed for the higher payment to offset the money you didn’t get during the delay. Make no mistake – you will be ‘betting’ on living long enough to break even for the later start of benefits!

Sources:

How to Use Social Security After the File-and-Suspend Rule Ends: The government closed the lucrative loophole this year. Jeff Brown, Usnews.com. May 4, 2016.
Life After 'File and Suspend' - That strategy is history, but its 'restricted application' cousin remains in place — for some people. Stan Hinden, AARP.org, July 2016.
Retirement Planner: Suspending Retirement Benefit Payments. Social Security, Ssa.gov. Accessed March 30, 2017.
The "File and Suspend" Strategy. Staff, Socialsecuritychoices.com. Accessed March 30, 2017.

The data above were taken from sources deemed reliable. However no guarantee can be made as to their completeness and accuracy.
Interpretations of the data, views and/or opinions expressed are those of the Jamison Financial Group based on market and economic conditions as of the date of publication and are subject to change. They do not necessarily reflect the opinions of any other individual, group or organization.
Nothing in the above is meant to be, nor should it be construed as, investment advice or recommendations to buy or sell any security. Individual securities, whenever mentioned, are for illustrative purposes only and may not be relied upon as investment advice.
Tax and/or legal information contained herein is general in nature and for informational purposes only. It should not be relied upon as advice. Consult your tax professional or attorney regarding your unique situation.
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