A new budget ruling from Congress has changed the way married couples can claim Social Security–but how will these changes affect you and your spouse?

 

Social Security is a major source of income for most retirees, and in recent years many married couples have taken advantage of the “file-and-suspend” strategy to boost their total benefits. However, that popular loophole is about to become a thing of the past due to a bill recently passed by Congress. From May 1 of this year, couples will no longer be able to use file-and-suspend. This method enabled one spouse, typically the higher earner, to file for Social Security upon reaching full retirement age, allowing the other spouse (who has to be at least 62) to claim a spousal benefit via “restricted application.” The first spouse would then immediately suspend (and therefore defer) his or her primary benefit, which would then grow 8% per year, up until age 70.


In other words, married couples could benefit from spousal benefits and “delayed retirement credits” simultaneously, pocketing up to $50,000 more in benefits over the course of their retirement.


Couples who have already filed-and-suspended (or plan to do so before May) won’t be affected by the new legislation. For those who turn 62 on January 1 of next year or later, file-and-suspend will no longer be an option.


However, spouses can go on filing “restricted applications” in the future (as long as they turn 62 by the end of 2016). If you turn 66 next year, say, you can file for just spousal benefits (based on your husband or wife’s record) and defer your own benefits until 70. Your spouse must have established a filing date for his or her primary benefit (and could have suspended it under file-and-suspend) in order for you to make a spousal benefit claim using “restricted application.” 


If you and your other half missed the “file-and-suspend” boat, think about other ways you can both maximize your Social Security benefits using strategies that are still available. One or both of you may consider working a few years longer, or stretching out other sources of retirement until age 70. That way, you can both wait until maximum retirement age before claiming benefits—something the vast majority of Americans don’t end up doing. Your estimated life expectancy and other individual circumstances will play a key part in your decision as to when you start claiming. What is crucial is that you get your hands on your Social Security statement via the Social Security Administration’s website. This will give you an estimate of what your monthly benefits will be if you retire at early, full or maximum retirement age.      


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