For Mark Roberts’ Use: If you’re like many people, Social Security will comprise a significant part of your retirement income. And yet, considering the size and complexity of the government program, it’s no wonder that so many people are confused about how to file for their Social Security benefits. You have many options at your disposal, and you should consider each decision carefully. However, one option, called “file and suspend”, is set to disappear completely in about six months’ time.
What is file-and-suspend? You probably know that the timing of your Social Security claim will affect the size of your monthly benefits checks. For example, filing early at age 62 could mean your checks are up to 25 percent smaller than they would be if you waited until full retirement age (65 to 67, depending upon when you were born). On the other hand, waiting beyond your full retirement age to file for benefits can net you a larger check each month. That’s often the smarter option, particularly for retirees who expect a long life span and want to ensure a higher monthly income.
File and Suspend allowed the higher-earning spouse to “file” for Social Security and then immediately “suspend” the benefits. This allowed the higher earner’s benefits to continue to grow. Meanwhile, the lower-earning spouse could file for their spousal benefits right away. He or she receives a check for about half of the higher-earning spouse’s benefit amount, even though those benefits are suspended. This method nets the couple some additional income while preparing for retirement, but also allows the higher-earning spouse to work toward a higher benefit check in the future.
When the higher-earning spouse does eventually start receiving their checks, the lower-earning spouse has the option of converting from spousal benefits to his or her own individual benefit. In many cases this results in a larger net monthly income for the couple.
Unfortunately, Congress decided to eliminate the file-and-suspend strategy when reaching a budget agreement on November 2 of this year. Most couples will no longer be able to take advantage of file and suspend, with one exception: The new law does not take effect for six months (from the time the bill was signed). During that time, couples can still file and suspend their benefits if they have both reached full retirement age.
So here’s the point…
Just when you think that you’ve figured out the most advantageous way to collect Social Security, things can change (and change quickly). The wise move is to work with an experienced professional and make sure that you understand all of your options.
Call our office to make an appointment, and we will help you select the Social Security strategy that is best for you!