Social Security filing strategy deadline nears

Social Security filing strategy deadline nears

Deciding when to start collecting your Social Security benefits is about to get easier. And while easier is usually better, there is a trade-off: the changes could shrink your potential lifetime Social Security income. 

Last year’s budget bill will soon put a halt to two Social Security filing strategies for couples that we have previously discussed in this column: file-and-suspend and restricted application. Let’s review the strategies:

  • File-and-suspend. By filing for and immediately suspending benefits at full retirement age, a person allows his or her spouse to draw spousal benefits while his or her own benefit increases through delayed retirement credits by up to 8 percent per year until the person reaches 70. Just the act of filing opens the door for the spouse to receive benefits based on the suspender’s record.
  • Restricted application. Someone who has reached full retirement age could elect to restrict his or her application to only spousal benefits. This allows benefits based on the person’s own record to accrue delayed retirement credits, but still provides some income. When used in conjunction with the file-and-suspend strategy, there’s a potential for a large boost to lifetime Social Security benefits.

Those currently using one of these strategies will not be affected by the new rules. However, if neither you nor your spouse is claiming Social Security come May 1, the file-and-suspend strategy will no longer be an option. Those 66 and older can use it until April 30; after that, you’ll still be able to suspend benefits, but no one else (spouse or child) will be able to claim benefits based on your record if you’re not receiving them.  

There’s a little more leeway with the restricted application rules. If you turned 62 last year, you’ll still be able to file a restricted application for only spousal benefits at 66 – allowing your own benefit to grow larger. But to do this, your spouse must be receiving a benefit.

These changes will not affect survivors, who will still have the ability to claim a reduced survivors benefit at 60 and allow their own benefit to continue to grow. Alternately, survivors can claim benefits at 62 based on their work records and allow the survivors’ benefit to grow.

With the elimination of these two strategies, the options around Social Security filing shrink, but the decision of when to begin benefits remains an important part of retirement planning. 

 

J.J. Montanaro is a certified financial planner with USAA, The American Legion’s preferred provider of financial services. Submit questions for him online.