The federal budget agreement reached at the end of 2015 ends two Social Security planning strategies. After April 29, 2016, the “File and Suspend” and the “Claim Now, Claim More Later” strategies will no longer be allowed for Social Security beneficiaries.
The “File and Suspend” strategy allowed a worker to file for benefits and then suspend them. Then, the worker’s spouse or children could receive spousal, children, or disability benefits while the worker postponed receiving benefits and continued to earn retirement credits. After the new law takes effect, a Social Security beneficiary cannot claim on another worker’s benefit until the other worker is actually receiving benefits (not merely benefits in suspension status). Workers can still file and suspend, but others cannot receive benefits on their work history during the suspension.
The “Claim Now, Claim More Later” strategy allowed a spouse, upon full retirement age, to choose whether to take spousal benefits or benefits on his or her own record. For workers that were not 62 years old prior to January 2, 2016, a spouse no longer is able to take the spousal benefit at retirement and switch to the his or her own record later. The spouse can chose at the time of retirement to take the higher of the two benefits but cannot switch to his or her own record if they choose the spousal benefits first.
What should you do:
If you are going to be full retirement age (over age 66) before April 29, 2016, you need to consider whether or not you want to file and suspend your Social Security benefits. The filing and suspend strategy can allow spouse 1, over age 66, to file and suspend his or her benefit. Spouse 2, if over 62 on January 2, 2016, can, when spouse 2 turns 66, choose to take spousal benefits while spouse 2’s benefits continue to accrue. Spouse 1 can even continue to work so spouse 1’s benefit is also continuing to grow. For this plan to work, spouse 1, must file and suspend prior to April 29, 2016.
The experienced elder and special needs law attorneys at McGuire, Wood & Bissette, P.A. are always available to help you or your clients with answers regarding “File and Suspend”, “Claim Now, Claim More Later”, and other questions regarding Social Security, Medicare, Medicaid and Veterans benefits.