Social Security Alert: Last Call for File-and-Suspend

Click here for a full recap of the key benefits and changes put into place following the passage of the Bipartisan Budget Act of 2015.

As many of you know, the Bipartisan Budget Act of 2015, signed into law by President Obama last November, impacted several popular Social Security filing strategies, including two that are most commonly used by married couples today: file-and-suspend and restricted application.

Since the signing of the Bipartisan Budget Act, the Social Security Administration (SSA) has provided clarification on several details that were not specifically defined in the initial legislation. Here is a summary of the final details you should know:

File-and-Suspend

Recap: This strategy allows one spouse to file for Social Security benefits at their full retirement age (FRA) and then immediately suspend the collection of the benefits as far out as age 70. One of the key elements of this strategy is that it addresses one of the qualifying factors to allow a spouse to collect a spousal benefit based on their earnings record.

Deadline Approaching: To take advantage of this strategy, you must be 66 and file and suspend your benefits on or before April 29, 2016. The SSA recently announced that it will not process any suspension requests submitted on or after April 30, 2016. However, if you file and suspend before April 30, but your request isn’t processed until April 30 or later, the SSA will still honor your claim — thus, you’ll still be able to take advantage of the strategy (so long as you’re of eligible filing age).

alert-last-call-for-file-and-suspend

Restricted Application

Recap: This provision allows a married individual who has reached their FRA to claim their spousal benefit only which enables them to maximize their own worker’s benefit, allowing it to grow by eight percent each year until age 70. Once the individual reaches age 70, they can file for their now-maximized worker’s benefit and discontinue their spousal benefit.

Key Change: This will no longer be available, unless you turned 62 on or before January 1, 2016. Unfortunately, filers who turned 62 on or after January 2, 2016, will no longer be able to take advantage of this strategy.

Further Clarification on Other Important Topics

1. Spousal Benefit for Divorcees

Recap: If you’re divorced, you’re likely eligible for a spousal benefit based on your ex-spouse’s earnings record if your marriage lasted 10 years or longer, you are currently unmarried and you are age 62 or older.

Clarification: The Act’s original language made it seem as though a divorcee would have their benefits suspended if their ex-spouse decided to suspend his or her benefit on or after April 30, 2016. The SSA recently clarified this matter by stating that a divorced spouse can still collect his or her spousal benefit even if their ex-spouse suspends his or her own benefit on or after April 30.

2. Retroactive Benefits

Recap: As part of the file-and-suspend strategy, an individual has the opportunity to file for retroactive benefit payments (in the form of a lump sum), all the way back to the date they first filed and suspended their benefits.

Clarification: This provision is still available, but only to those individuals who reach their FRA and file and suspend their benefits on or before April 29.

How to Suspend

If you meet the eligibility requirements and have questions about suspending your benefits, please contact a member of our advisory team or visit the SSA’s website for more information.

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Karl Schwartz
Karl Schwartz

CPA, CFP® | Senior Financial Advisor

Karl Schwartz, CPA, CFP®, is a Principal and Senior Financial Advisor with Hewins Financial Advisors in Miami, FL, and in Media, PA. Karl serves on Hewins' Financial Planning Committee and specializes in comprehensive financial planning and investment management for high-net-worth individuals and families. He also focuses on planning matters related to same-sex couples and healthcare professionals and practices.

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Social Security Alert: Last Call for File-and-Suspend

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