An End to File & Suspend

Social Security filing strategies were impacted on Monday, November 2nd, when President Obama signed into law a budget deal that eliminated “file and suspend.”  This maximization strategy worked as follows: One spouse files to receive Social Security benefits at full retirement age and immediately suspends them.  The other spouse elects to receive spousal benefits based on their spouse’s work history.

The key advantage to file and suspend is that it allows both spouses to continue growing their own Social Security benefit until age 70.  Benefits increase roughly 8% per year between full retirement age and 70 years old, which equates to a significant amount the longer one lives.

This strategy was seen as a loophole and will be ended in about six months.  However, a person/couple can still take advantage of the strategy up until the official end date, and those who already implemented file and suspend will be grandfathered in.

The new rules allow spousal benefits only if the spouse is already collecting Social Security retirement benefits.  And retirees will only be able to receive one benefit, the higher of their own retirement benefit or the spousal benefit.  They’ll no longer be able to begin with spousal benefits and then switch to their own retirement benefit down the road.

Widows aren’t affected by this new law and can still claim reduced survivor’s benefits as early as age 60 before switching to their own retirement benefits.

Retirees who wait until age 70 to take Social Security retirement benefits typically will need to live at least 10 years in order to come out ahead by waiting, as opposed to taking early Social Security benefits at age 62.

All of this Social Security talk can get quite technical and wordy.  Lean on us with any questions you have first, but more than likely, we will refer you to the local Social Security office.  We have found them to be very knowledgeable, helpful, and pleasant to deal with.

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Since 1995, Pittenger & Anderson has guided individuals and families going through money-in-motion events. We are a fee-only Registered Investment Advisor and a full-time fiduciary providing investment management, financial planning, and complimentary services to 700+ clients in over 30 U.S. states.

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