For years, many couples have utilized the file-and-suspend method of claiming their Social Security benefits. It helped many people reap thousands more in benefits over their lifetimes – a great help when you consider the longer life spans and rising costs of living faced by retirees these days.
The strategy was fairly simple: When both husband and wife reached full retirement age, the higher-earning spouse would file for benefits but then suspend payments until a later date. As you might already know, waiting to receive Social Security benefits can result in about a 7 percent increase in monthly checks for each year that you wait.
Meanwhile, the lower-earning spouse would file for spousal benefits and receive a monthly check at about half of their spouse’s scheduled benefits. Later, when their spouse began receiving payments, the lower-earning spouse would then convert to their own individual benefit amount, if it was higher. This was a great way for couples to prepare for a more secure retirement, while also allowing the younger-earning spouse to claim a larger survivor benefit one day (if they outlived their spouse).
If you were counting on utilizing file-and-suspend to maximize your own Social Security benefits, you might need to come up with a new plan. On November 2, Congress passed a new budget deal that axes the file-and-suspend provision. The law won’t go into effect for six months from that date, so if you and your spouse will both reach full retirement age during that time, you can still use the strategy.
If you have already filed and suspended your benefits, nothing will change for you and your spouse. The new rules only affect future Social Security recipients.
The rest of you might need to come up with another plan to maximize your income in retirement. With file-and-suspend no longer an option, you might need to make adjustments to your retirement income plan. Call our office to schedule an appointment, and we can help you assess your situation and discover other ways to secure a stream of income in your later years.