Last fall, the Bipartisan Budget Act of 2015 made significant changes to Social Security regulations. One of the biggest changes was the closing of the “file and suspend” loophole, which helped many couples maximize their Social Security benefits. But while we tend to think of the file-and-suspend method as a beneficial strategy for couples, its demise might impact divorced women even harder.
Under the file-and-suspend strategy, the spouse with more work credits could file for benefits at full retirement age but then suspend those payments so that benefits could grow larger over time. Meanwhile, the spouse with fewer work credits could still file for spousal benefits, and receive checks at half the amount of their high-earning spouse’s benefit amount.
This strategy was commonly used by married couples to maximize their benefits, but it was also beneficial to divorced people. In particular, women tended to be the ones with fewer work credits, because many women spent many years away from the workforce to care for their families. Years later, after a divorce, the file-and-suspend strategy helped divorced women claim Social Security benefits even if their former husband suspended his own benefit. You could say that this practice provided a much-needed safety net for women who dedicated their lives to their families, at the personal cost of missing out on work credits.
The new law will soon take effect, and we hope that married couples are able to work together to find a solution. Unfortunately, the new rules could heavily impact divorced women, who have no control over whether their former husbands suspend their benefit payments. If he chooses to suspend payments, she won’t be able to claim spousal benefits.
And of course, this situation will also affect some men. Sometimes it is the husband who is the lower-earning spouse in a marriage.
Those who were the lower-earning spouse (in a marriage that lasted ten years or more) can no longer count on receiving spousal benefits, if their former spouse chooses to suspend their own payments. These individuals should take appropriate retirement planning steps now, to potentially establish a stable income in retirement. Call our office to schedule an appointment, and we can help you analyze your options and identify the solutions that are appropriate for you.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.