Luke Delorme | Money Talk: Beat the deadline on file-and-suspend

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GREAT BARRINGTON >> New Social Security claiming rules mean the strategy of filing and suspending your benefits will no longer be beneficial for married couples. But there is a window for some people to be grandfathered in under the old rules.

Here's an example of the old "file-and-suspend" strategy at work: A husband files for benefits but doesn't actually collect them ("suspended benefits"), while the wife collects spousal benefits without affecting her own earned future benefits. In essence, the couple has the opportunity to dip into Social Security without reducing the long-term benefit of postponing. When benefits are postponed until age 70, they can grow by 32 percent.

This tactic will soon no longer be allowed. However, for those of you who were at least age 62 by the end of 2015, there may still be a way for you to take advantage of the old rules.

You should consider doing additional research to understand the nuances of claiming, but I want to emphasize three important points:

• For those of you who are at least the current full retirement age of 66 with a spouse who is at least 62, it may be worthwhile to file-and-suspend, but the deadline is approaching! The deadline for file-and-suspend is April 29, 2016. After that, your options will be more limited.

• Even if you won't be age 66 by April 29, there may be an opportunity for restricted claiming of spousal benefits so long as you were at least age 62 by the end of last year.

• According to recent reports, workers at the Social Security offices may be unfamiliar with the deadlines, the rule changes, or who is still eligible to file and suspend. You must do your homework and know what you're talking about when you head to the Social Security office.

First, you need to know who should take advantage of file-and-suspend. The way that you make money from file-and-suspend is to have one spouse suspend benefits while the other spouse files a "restricted claim" for spousal benefits only.

This only makes sense if you'll both be between the ages of 66 and 69 at the same time. If there's a greater than four-year age difference, you don't need to suspend benefits, since one spouse will be collecting by the time the other reaches full retirement age. The spouse should only claim spousal benefits once he or she reaches the full retirement age. If you're at least 70 and already collecting, there is no need to suspend benefits for your spouse to file a restricted claim. This is where many people misunderstand the nuances of file-and-suspend.

However, even if there is a larger age difference or if you won't be full retirement age by April 29, you may still be able to take advantage of restricted claiming. For those of you who were at least age 62 by the end of last year, restricted claiming is still an option once one of you collects benefits.

If you're at least 62, you could potentially file a restricted claim for spousal benefits once you are full retirement age and once your spouse collects. For example, if your spouse has already collected, you could file a restricted claim for spousal benefits (as long as you're full retirement age) and you'd get free spousal benefits while your own earned benefit grows. Depending on your age difference, restricted claiming may help you dip into Social Security for at least a short time.

All of this is a lot to take in, and resources on the topic are often limited. If you call the Social Security office, you may get a knowledgeable worker, but it's best to spend as much time as necessary to really understand the nuances of the file-and-suspend and restricted claiming so that you can control your own future.

Luke Delorme is a research fellow at the American Institute for Economic Research in Great Barrington.


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