Commentary by Joel Harris
A little-known Social Security claiming strategy is going away after April 30 this year. With the Bipartisan Budget Act of 2015, the strategy known as “file and suspend” will no longer be available to the American public.
What is file and suspend?
Under the current law, a filer who is at or past full retirement age can file for individual benefits and immediately suspend receiving them. This allowed a spouse or dependent to collect a “spousal” benefit off their record, in addition to getting an 8 percent simple interest growth to their benefits until the age of 70.
The new law will allow anyone 66 or older to take advantage of this strategy through April 30. They can still file and suspend their benefits, which allows an eligible spouse or dependent to collect a benefit off their record under the old rules. That being said, anyone who is at, or will be reaching full retirement age before April 30, 2016, should seriously evaluate whether or not to file and suspend their benefits before it is too late.
After April 30, the “file and suspend” strategy will no longer be in affect. In a nut shell, for a spouse or dependent to collect a benefit, the original filer will have to file for their own benefit and be required to collect the benefit and forgo the 8 percent simple interest growth under the delayed retirement credits provision. If an individual files and suspends their benefits, all spousal and dependent benefits will be immediately suspended as well.
One important caveat is if you’ve filed and suspended your benefits already, you will be grandfathered in, and your strategy will continue to carry on before the new law is put in place.
The time to act is now. Contact your advisor soon to see if it is worth your while to file and suspend your own benefits before April 30.