The budget deal that was signed into law recently gets rid of one of the key strategies that has increased lifetime Social Security benefits by up to roughly $60,000 for some high-earning couples. The strategy known as “File and Suspend/Restricted Application” was applied when both spouses who worked under social security attempted to maximize benefits by collecting first off their spouse’s earnings. Before Congress implemented the law change effective with the passage of the passage of Bipartisan Budget Bill Act of 2015, one spouse had the ability to restrict the collection of their own benefits but still collect on the spouses benefit at age 66. This strategy enabled the spouse to allow their benefit to grow at 8% a year while collecting 50% of the spouse’s benefit. They could then decide to switch back to collecting off of their own higher benefit at age 70.
Starting in May of 2016, spouses at age 66 can only choose to receive the higher of either their own social security benefit or 50% of their spouse’s benefit. (Those who are age 62 at the end of 2015 retain the ability to apply the old file and suspend rule as long as their spouse has suspended or is taking benefits.)
With two higher income spouses with average life expectancies it will usually be advantageous for both to wait until age 70 to begin collecting their benefits. For those spouses with a greater than 50% difference in social security benefits, some assumptions need to be made about life expectancies in order to determine if it is best for the one spouse to suspend their benefits until age 70 or not. As always, CMP will continue to work with clients to maximize their overall social security benefit over their lifetime.
By Barry Jamieson MS (Based on WSJ article of November 19, 2015)
