File-and-Suspend Benefit Maximization for Couples

Social Security Changes affect File-and-Suspend Benefit Maximization for Couples

The “File-and-Suspend” method of maximizing Social Security retirement benefits has been used by married couples for decades. Recent budget bill changes passed by Congress however phase out this process by closing the “loophole” in Social Security regulations that allowed spouses to increase their Social Security income as a couple.

The File and Suspend Method Explained

This is a method of coordinating and maximizing benefits. The spouse with the highest earnings on his or her income record applied for benefits at age 66. That spouse then suspended benefits immediately thereafter, and waited until reaching the age of 70 before activating benefits again.

In the mean time, the spouse with lower earnings record would draw Social Security spouse benefits on the earnings record of the spouse who delayed benefits.

If you delay benefits until age 70, your Social Security check is larger every month, increasing by 8 percent for each year that you delay.

The file-and-suspend method allowed married couples to draw greater benefits overall, both immediately and in the future.

Why this Method will No Longer be Available

Congress recently passed a budget bill changing Social Security regulations. Beginning May 1, 2016, a spouse can no longer draw spouse benefits unless his or her partner is also receiving Social Security. This means, among other things, that the File-and-Suspend method will no longer be an option for married couples to maximize their Social Security benefits.

What to do if You can File-and-Suspend before May 2016

If you are the spouse with the highest earnings record, then you’ll need to follow these steps to take advantage of the forewarning budget changes provide:

• You must apply for Social Security retirement benefits by calling 1-800-772-1213, by submitting an online application, or by visiting your local SSA office.
• Your spouse must also apply for spouse benefits under your work record.
• Once your benefits are active, you must contact the SSA to suspend or delay benefits, while leaving your spouse’s benefits active.

Anyone who is already age 66 or will reach age 66 before May 1, 2016 can still take advantage of the file-and-suspend method. Provided you’re able to file and suspend benefits before budget bill changes are enacted, you and your spouse can be “grandfathered” in, allowing you to still maximize your coordinated Social Security benefits.

Other Options for Maximizing Social Security as a Couple

If you and your spouse are too young to take advantage of the file-and-suspend method, there are some other ways in which you can maximize your coordinated benefits, including:

• Try to avoid taking early retirement, if possible – you can apply for benefits as early as age 62, but doing so will reduce the amount of your monthly benefit checks for the entire time that you receive Social Security.
• Delay applying as long as you can – if you can delay applying until age 70, you will increase the amount of your monthly Social Security by 8 percent for every month between age 66 and 70. Once benefits kick in, your payments will be higher.
• Apply for disability benefits instead – if you are no longer able to work due to health complications, you may be able to apply for Social Security disability benefits and avoid applying for early retirement. Just keep in mind that disability automatically transitions to retirement benefits once you reach full retirement age on your 66th birthday however.

A financial advisor or Social Security advocate or attorney can help you determine the best course of action for you and your spouse in order to maximize your coordinated benefits.