The big news in the world of retirement planning is end of a lucrative couples Social Security claiming strategy, file and suspend with a restricted application. The ability take advantage of this lucrative option comes to an end as of April 30, 2016 thanks to the passage of the Bipartisan Budget Bill of 2015.
What is the file and suspend strategy?
Under this strategy spouse A upon reaching their full retirement age (FRA) would file for their benefit and then suspend it. They would accrue delayed credits at 8% per year out to age 70 (or sooner) at which time they would resume taking their benefit.
Once spouse B reached their FRA they would then file a restricted application for benefits in order to receive a spousal benefit based upon spouse A’s earnings record. Their own benefit would continue to accrue out until age 70 at which time they would switch to their own benefit if it was higher than the spousal benefit or continue to take the spousal benefit if it was larger.
In many cases this might add an additional $60,000 in benefits to the couple over the four years between spouse B’s FRA and age 70.
There are numerous reasons to do this and it has become a popular couples claiming strategy in recent years.
This option ends as of April 30, 2016.
Who can still take advantage?
Couples who have executed this strategy are fine and there will be no changes. Couples who are eligible to execute this strategy prior to April 30, 2016 will still be able to.
What are the implications?
Couples who might have factored this into their retirement strategy will need to rethink their plans and their Social Security claiming strategy.
Those who advise clients nearing retirement and those who provide Social Security tools to the financial advisors will need to rethink their advice and redo some of these tools. Websites offering Social Security calculators will need to redo them as well.
If this change impacts your situation I’d urge you to consult with a knowledgeable financial advisor.
There is much more detail on this change and much has been much written on this topic by a lot of folks whose opinions and knowledge I respect. Below are some excellent articles to check out to learn more about this.
8 Questions About Social Security Claiming Strategies by Mark Miller
The Death of File & Suspend and Restricted Application by Jim Blankenship
Congress kills Social Security claiming loopholes by Alice Munnell
Social Security changes will hit couples, divorced women hard by Robert Powell
New Social Security Rules: What You Need to Know by Mike Piper
Check out these two books on Amazon by Jim Blankenship and Mike Piper which have both been updated to reflect the new rules (note these are affiliate links and I earn a small fee if you purchase at no extra cost to you)
In addition here are two pieces on the topic that I recently wrote for Investopedia:
The Bottom Line
The popular couples Social Security claiming strategy, file and suspend with a restricted application is coming to an end as of April 30, 2016. This is a game-changer for a lot of couples. This may be the time to seek out a knowledgeable financial advisor to advise you. Also stay tuned as there will undoubtedly be much more written on this topic moving forward.