If you’re familiar with Social Security claiming strategies, you may remember a strategy called “File and Suspend”. It was used in order to allow one spouse to begin their spousal benefit on the other spouse’s working record while allowing that other spouse to actually delay their Social Security benefits until a later age (while it grew by delayed credits). Legislation effectively removed this “File and Suspend” strategy described above for those who had not used it by April 2016.
Although there still remains a lot of confusion about whether one can actually file and suspend benefits after the law change.
One can still file and suspend their benefits at full retirement age or afterward. The provision still exists. What has changed is the ability to use this file and suspend provision to allow a spouse to begin their spousal benefit (while the primary worker delays their own).
With current law, whenever an individual files and then suspends their benefit, all auxiliary benefits that are tied to that working record (such as spousal benefits or children’s benefits) are also suspended.
Let’s look at an example before the tax law change and after the tax law change.
BEFORE TAX LAW CHANGE:
An individual at full retirement age could file for their own benefit and then immediately suspend them so that the opposite spouse could begin taking a spousal benefit. The individual who filed and suspended would earn 8% per year delayed credits on their Social Security benefits until they reactivated the benefit later on, usually at age 70. It was a way around the requirement that an individual activate their benefits in order for the opposite spouse to begin their spousal benefits.
BEFORE TAX LAW CHANGE
The worker can still file and suspend their benefits at or after full retirement age, but now the opposite spouse’s spousal benefit would also be suspended. In effect, the law change did away with this loophole in the system which allowed for activation of a spousal benefit without the opposite spouse worker actually activating theirs.
As we mentioned in a previous article (http://tsseducationservices.org/suspending-social-security-benefits/), there are valid reasons to suspend a Social Security benefit even after the tax law change. Unfortunately the “File and Suspend” option to activate the opposite spouses spousal benefit is no longer available.
If you have any questions please feel free to contact me.
