The End of File and Suspend

The End of File and Suspend

For as long as I have been a financial planner I have utilized a social security claiming strategy know as "claim and suspend" for clients in a position to delay until age 70. This would allow the spouse with the highest lifetime earnings to claim social security at the full benefit age of 66, but not receive any payments. He or she would continue to be eligible 8% annual step up, but would allow the spouse to begin receiving the spousal benefit of 50% right away. Not any more.
 

Under the new budget legislation, Congress has decided to close this perceived "loophole" in the Social Security rules. It will no longer be possible to file a restricted application for just spousal benefits. The new rule stipulates that suspending an individual's benefits will also suspend any benefits to other people based on the same earnings record. 
 

What isn't clear yet is that the new crackdown may suspend current spousal or dependent benefits in 6 months for those who are only receiving those benefits thanks to claim and suspend. In other words, those who already engaged in the strategy may find it terminated mid-stream, and no benefits will be payable until the individual who suspended chooses to reinstate benefits (either to restart them now, or finish waiting until age 70).

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