** This article has been revised from its original version which was published on October…
File and Suspend
Before you panic, please note that for those who meet certain age requirements, the changes to the file and suspend strategy will take effect in six months.
Under the current rules, once you reach your full retirement age, you can file for your Social Security benefits, but request that such benefit not actually be paid. This allows you to receive what are known as delayed credits and will increase your own Social Security benefit by 8 percent per year.
The file and suspend strategy lets your spouse or child claim a benefit based on your earnings record, while at the same time allowing your own benefit to continue to compound and grow.
Now, after May 1, 2016, instead of your spouse or child being allowed to receive a benefit based on your earnings record after you’ve filed (and then suspended), you must actually be receiving benefits for your spouse or child to receive a benefit based on your earnings record.
Take Action: If you are at your full retirement age or older, you can still use the file and suspend strategy before May 1, 2016.
If you are a worker who is younger than full retirement age, you will not have the option to file and suspend. If you suspend your benefits at your full retirement age, you can still earn delayed retirement credits, but no one can collect benefits on your earnings record during the suspension. This suspension of benefits is helpful to increase your eventual benefits, but will not help your family receive benefits in the interim.
Another popular strategy for couples who reach their full retirement age is to file what is known as a restricted application. A restricted application essentially allows you to request that Social Security pay you only your spousal Social Security benefit—not your own retirement benefit.
This approach helps you to receive at least some Social Security benefits, while still allowing your own retirement benefit to earn delayed credits until age 70. You could then switch over to your own benefit, up to age 70.
But thanks to the new budget deal, this strategy will no longer be available for millions of Americans.
Take Action: Workers who will be age 62 or older by the end of this year can still use the restricted application strategy. If you are younger than 62 at the end of 2015, this strategy will no longer be an option.
However, some workers will be grandfathered in. For instance, spouses who are already collecting benefits on their partner’s earnings record can continue to do so and switch to their own larger retirement benefit at a later date—up to age 70.
It is important to research both strategies (File and Suspend and Restricted Application) and talk to a qualified professional to determine how Social Security fits into your overall retirement plan and to think of ways to maximize your benefits.
Eric J. Einhart
Russo Law Group, P.C.
100 Quentin Roosevelt Blvd., Suite 102
Garden City, NY 11530