his article was originally posted on NY Daily News, written by contributors Alex and Ken Sutherland. You can access that article by clicking here.
We all know that Social Security is an important part of retirement income. Particularly now with so much market volatility and uncertainty, the need for secure, reliable income is in high demand.
There are many strategies to help maximize your Social Security benefit amounts, some less known than others, and one of the more powerful strategies is going away — very soon!
The Social Security filing method known as “File and Suspend” is being eliminated as a result of the Bipartisan Budget Act of 2015.
This strategy works exactly as it sounds. It allows retirees to file for their Social Security benefits and then immediately suspend them
Why would anyone do this? By filing for your benefits, you go on record with the Social Security Administration that you have filed and they calculate your benefit amount. This allows your spouse to potentially receive spousal benefits off of your record, while still allowing your own benefit to continue to defer and grow.
The window of time is shrinking to take advantage of this particular Social Security filing strategy. As of April 29, 2016, those who would otherwise qualify to use this filing strategy will no longer be able to do so.
If you, or someone you know, will be 66 years old or older by April 29 — pay attention! It might be wise and financially beneficial to take advantage of this strategy before it’s too late.
Sounds complicated? Let’s look at a hypothetical, but common example.
Let’s say a husband and wife are turning 66 together this April and could each start their benefit, and let’s presume each would receive $2,000 monthly.
However, if they delay their Social Security benefits until age 70 they would each collect approximately $3,000 per month. Under this current scenario, they would receive no payments until age 70, then start receiving a combined $6,000 per month.
Here’s where they can take advantage of the file and suspend strategy. ” One of them is able to file and suspend their benefits while the other spouse files a “restricted application” for their spousal benefits only.
This would provide approximately $1,000 per month of spousal benefits while still allowing their own benefit to defer and grow (at approximately 8% per year) until age 70. Under this scenario, they would receive $1,000 a month between ages 66 and 70, then start receiving a combined $6,000 per month.
This strategy allows them to collect about $12,000 a year for four years ($48,000) while not reducing their eventual benefits. If you qualify for this strategy, but do not utilize it, you could be leaving money on the table that otherwise would help you in retirement!
As you can see from this example, file and suspend can be a very powerful strategy to increase your income from Social Security. But again, keep in mind that after April 29, this strategy is off the table.
Bottom line: If you, or someone you know, will be 66 years old or older by this April you should talk to a Social Security expert and see if you should take advantage of this strategy while it’s still available.