Important Updates to Social Security Filing Strategies: File & Suspend and Restricted ApplicationSubmitted by Beacon Financial Planning of Cape Cod, Inc. on February 25th, 2016
New legislation will eliminate "file and suspend" and "restricted application" Social Security filing methods that were previously available to married couples. There is a small window to be grandfathered and file under these methods; however, the deadline to do so is April 29, 2016. Below, we discuss these two filing strategies and how they may impact you.
If you are currently using one of these strategies, you can take a deep breath, because people currently using any or all of the strategies, File and Suspend, Claim Some Now; Claim More Later, or the Combined Strategy, will be able to continue doing so.
People who apply before the April 29, 2016 deadline will still be able to take advantage of the rules as they currently exist.
Let’s review the two methods…
The File and Suspend method allows married couples to have one spouse file for benefits at full retirement age and then immediately suspend their benefit, allowing the other spouse to become eligible for the other spouse's benefits while the filer earns Delayed Retirement Credits (DRCs). (Delayed Retirement Credits increase the monthly benefit the filer eventually receives, as well as any survivor benefit which might be paid when he/she passes away.)
The Restricted Application method allows a spouse to choose to claim a spousal benefit from full retirement age until age 70 and then switch to their own retirement benefit, which will be higher because they have been accruing DRCs.
If you were born on or before April 29, 1950 (Age 65 1/2 or older by October 29, 2015)
You can still use the file and suspend strategy but must file for Social Security by April 29, 2016 and ask to have your payments suspended
You can still file restricted application at full retirement age if eligible for spousal benefits
If you already have filed a Social Security benefit under file and suspend you will continue to receive that benefit.
If you were born on or after April 30, 1950 and on or before January 1, 1954
You cannot use the file and suspend strategy
You can still file a restricted application at full retirement age if eligible for spousal benefits.
If you were born on or after January 2, 1954 (Age 62 or younger in 2015)
You are not eligible at any point in time for the file and suspend or restricted application filing method for your Social Security.
If you do have time to be grandfathered or if you are divorced or widowed and have questions, you will want to make sure to meet with your financial advisor WELL before the April 29, 2016 deadline to make sure you don't miss out on this opportunity. We are here and happy to help.
For more detailed information, visit the Social Security website: www.saa.gov/retire.