by Luke Delorme
The U.S. budget deal includes a provision that seeks to end the file-and-suspend and restricted claiming strategies. I explained these strategies in recent blogs as a way to bring couples upwards of $60,000 more in total Social Security benefits.
The section of the bill is titled “Closure of Unintended Loopholes.” Let’s take a look at the details of the proposal, who it will affect, and what you can do now.
What’s the deal?
Under current law, two-earner couples have the option to have one spouse file for Social Security benefits without actually claiming the money (file and suspend) while the other spouse files a restricted application for only spousal benefits. In effect, both workers have been able to delay their own benefits until age 70, at which point they can claim the maximum available benefit. This strategy allowed them to claim “free money” – the spousal benefit for one spouse – over the course of four years. Filing the restricted application for spousal benefits had no impact on either spouse’s own earned benefit.
The proposed legislation – which has passed Congress and awaits the president’s signature — will close this loophole. You will not be able to file and suspend and have a spouse claim a spousal benefit on your record. Nor will a spouse be able to file a restricted application for spousal benefits even if you are collecting. If you want to claim a spousal benefit, you will be “deemed” to claim your own, at which point you can no longer incur additional delayed retirement credits. In other words, once you claim spousal benefits, your benefits are not going to go up.
Who is affected?
The primary beneficiaries of this filing strategy were two-earner married households that were planning to delay benefits past the full retirement age. Since higher income people have more financial flexibility and the means to delay Social Security benefits, the strategy was primarily used by those households.
Leave A Comment