Time Running Out on Popular File-and-Suspend Social Security Claiming Strategy

One of the most lucrative Social Security strategies ever invented for married couples will soon join the dodo bird in extinction. As of April 30, the government will no longer permit one spouse to file for and immediately suspend benefits in order to open the door for the other spouse to claim spousal benefits. That nixes the benefit-boosting tactic that allowed a family to collect Social Security while one or both spouses accrued delayed-retirement credits, hiking benefits by 8% a year between ages 66 and 70.

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Under a crackdown approved by Congress last year, anyone who suspends benefits after April 29 will also cut off payments to a spouse or children based on that worker’s record. In other words, for someone else to collect on your work record, you’ll actually have to be receiving benefits, not just banking delayed-retirement credits.

Put in your claim. If you'll be 66 on or before May 1, 2016, and are interested in the file-and-suspend strategy, get crackin'. You must file for benefits by April 29 to lock in the old rules. (Couples already benefiting from the strategy are not affected by the crackdown.)

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You can call 800-772-1213 to set up a phone or in-person application session, but you may spend up to an hour on hold to make an appointment that could be days or even weeks away. Applying online at www.ssa.gov may be a better bet. William Meyer, whose firm, Social Security Solutions, offers sophisticated software to help workers maximize lifetime benefits from Social Security, reports that applicants are running into fewer glitches online.

Unfortunately, the online application does not offer the file-and-suspend option. Instead, you must note in a "comments" box your desire to do so. Meyer says this is an important way to document that your request has been made by April 29.

You must be 66 in order to file and suspend, and your spouse must be at least 62 to get spousal benefits. As long as you file and suspend by the April 29 deadline, your husband or wife can apply for spousal benefits after the deadline (if he or she turns 62 after that time, for example). If your spouse is at least 66, he or she can "restrict the application" to spousal benefits only. That allows both of you to earn delayed-retirement credits to as late as age 70. (Only workers age 62 or older by January 1, 2016, are allowed to restrict an application. Younger folks will automatically get their own benefit and be locked out of delayed-retirement credits.)

File-and-suspend can pay off for unmarried workers who beat the deadline, too, if they don't need the money right away and want to take advantage of delayed-retirement credits. As a general rule, Social Security will not pay more than six months' worth of benefits retroactively. But for those who qualify and file and suspend by April 29, there's no limit. If you file and suspend at 66 and decide at, say, 69 that you need the money, you could collect three years of benefits in a lump sum. Of course, that would mean forfeiting the delayed-retirement credits that had accrued.

The end of the file-and-suspend strategy for spousal benefits does not end the opportunity to suspend benefits at age 66 in order to undo part of the penalty imposed for claiming benefits earlier. That's exactly what Peter Lo, a retired chemist in Fremont, Calif., plans to do. Lo claimed Social Security benefits as soon as he turned 62, even though the $1,694 monthly benefit was 25% less than if he had waited until age 66. That cost him about $550 a month. When he turns 66 later this year, Lo plans to suspend his benefits, knowing that the 8%-a-year delayed-retirement credits he'll earn will deliver a big boost to his monthly income when he restarts benefits at age 70.

Buy Now: Kiplinger's Boomer's Guide to Social Security