File-and-Suspend Social Security Loophole Closing on Apr 29, 2016

The file-and-suspend strategy—or rather, a loophole—to claim additional Social Security benefits is closing up on Apr 29, 2016. This can be difficult to wrap your head around, so I’ll try to distill it in the simplest way possible.

Who’s Eligible for File-and-Suspend?

The file-and-suspend strategy applies to a very specific subset of married couples:

  • One of the spouses must have reached full retirement age (66) before Apr 29, 2016
  • The other spouse should be around full retirement age
  • Both spouses are delaying receiving Social Security benefits till age 70 to accumulate retirement credits, which can permanently increase their benefits by 8%/year

If one of the spouses has reached full retirement age (66) before Apr 29, 2016, he or she will be eligible to initiate this strategy. The other spouse should ideally be around full retirement age as well.

If you’re of this age, or know someone (like your parents, relatives, neighbors) who’s of the right age for this, they should take advantage of this strategy.

How Does File-and-Suspend Benefit You?

Usually, in order for your spouse to file for spousal benefits, you must have already filed to claim your retirement benefits.

The existing loophole allows you to file and immediately suspend taking your retirement benefits, allowing these benefits to grow till they reach their full potential at age 70… while your spouse is able to file for spousal benefits (recommended to do so at age 66, when spousal benefits are maxed out).

If you’ve been delaying receiving your retirement benefits till age 70, this is good news (albeit short-lived since this is going away on Apr 29, 2016). By initiating file-and-suspend, your spouse can file for spousal benefits that he or she otherwise would not have been able to do.

The spousal benefits that your spouse can claim is not chump change—this can be $1,000 – $2,000 per month.

How to Initiate File-and-Suspend

The spouse who has reached full retirement age (66) should do the following:

  1. Visit this Social Security page and click on the “Apply for Retirement Benefits” button.
  2. Proceed through the online application’s questions. You’ll be asked for things like:
    1. personal details
    2. current and former spouses’ names and dates of birth
    3. your employment and self-employment details for this year and last year
    4. citizenship status
    5. direct deposit information, and more
  3. When asked when to start your benefits, select the soonest possible month and year.
  4. In the remarks section, type in “I want to file and suspend my benefits until I reach age 70.”

Expect to receive a phone call from Social Security within the next few days. They’ll call to confirm that you’re indeed filing and suspending your retirement benefits.

Why You Should Initiate File-and-Suspend Online

While this sounds like a clandestine maneuver, this online application is more effective and creates a paper trail.

Visiting Social Security’s office to file-and-suspend has anecdotally been problematic. Misinformation has been distributed by Social Security’s staff, and sometimes, they may not complete the strategy correctly on your behalf.

Conclusion

If you’ve reached full retirement age, or know married couples where at least one of the spouses has reached age 66, initiating file-and-suspend is a no-brainer.

There is no disadvantage to this strategy—in fact, if you’re eligible, your spouse stands to gain thousands of dollars per year of extra benefits from it. But do hurry, as this loophole is closing soon on Apr 29, 2016.

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