File and Suspend
Social Security law has changed and the difference could mean tens of thousands of dollars for those turning 66 before May 1, 2016.
Current Law-Right now one individual in a couple can file for benefits at Full Retirement Age. Filing makes their spouse eligible for spousal benefits. The primary wage earner could then suspend receiving payments, which allows their future benefit amount to continue to increase 8% per year until age 70. This would provide the maximum monthly amount for the remainder of their life. At the same time, the spouse was able to apply for spousal benefits, which could amount to as much as $63,000 over those four years.
As of May 1, you can still suspend and get the increase, but you must be collecting payments in order for your spouse to receive spousal support. If you suspend your payment, you also suspend theirs. (This applies to all individuals eligible to collect on your work record—spouse, ex-spouse, dependent children, the disabled, and others.)
An eligible spouse receives 50% of the primary earner’s benefit. This does not decrease the primary wage earner’s benefit. It is in addition to. If the spouse has not yet reached FRA, they will receive a reduced amount. In the past a spouse could receive 50% of the primary earner’s benefit, while the primary earner’s benefit, as well as their own, continued to increase. They would then begin collecting at age 70 at which time both of their monthly payments will be at the maximum. They would receive these higher payments for the rest of their lives.
Though a small segment of the population will be affected by the rule change, it still adds up to a lot of people applying at the same time.
Social Security will be overwhelmed with applications and there is a question as to whether the staff or website can handle the increase in traffic. My brother-in-law filled out his application online in mid-January. He got a message that to process the file and suspend, he needed to speak with an agent. He called on January 20 and waited 32 minutes to set a phone appointment with his local office—White Plains, NY. The next available appointment was February 19th.
In order to be eligible for the file and suspend strategy, you must be 66 years old on or before April 30th 2016. You can file your application for benefits three months prior to your date of birth, which means now.
If you are turning 66 by April 30, file your application now. Start the process. Social Security will have a backlog of applications. You’ll want yours processed before the deadline.