Executive Summary
When Congress passed the Senior Citizens Freedom to Work Act in 2000, it introduced a new concept called “voluntary suspension” of benefits, allowing those who had already started Social Security benefits to stop their payments and earn delayed retirement credits. In the process, however, the new voluntary suspension rules unleashed several additional Social Security claiming strategies, including various “claim now, claim more later” tactics involved File-and-Suspend and Restricted Applications for spousal benefits.
And under this week’s budget legislation, Congress has decided to close these perceived “loopholes” in the Social Security rules. By extending the rules for deemed application, it will no longer be possible to file a restricted application for just spousal benefits. And with an extension of the “suspension” rules that stipulate suspending an individual’s benefits will also suspend any benefits to other people based on the same earnings record, Congress has killed off the various “File and Suspend” strategies to allow spousal and dependent benefits to be paid while still earning delayed retirement credits.
Perhaps most notable for the new Social Security crackdown, though, is the effective date for the rules. While the new limits to Restricted Application will not apply to anyone who is already age 62 or older in 2015, the new crackdown may suspend current spousal or dependent benefits in 6 months for those who are only receiving those benefits thanks to File-and-Suspend! will kick in 6 months from now (thanks to a recent amendment to the original legislation), grandfathering anyone currently going through file-and-suspend but limiting anyone who tries to suspend benefits thereafter. In other words, those who already engaged in the File-and-Suspend strategy may find it terminated mid-stream, Beyond that point, anyone who suspends will find that 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).
Notably, the crackdown on these voluntary-suspension-related tactics doesn’t actually kill the rules for voluntary suspension itself, which remains on the books. But now, aside from a few esoteric scenarios (including the recent Hold Harmless Medicare claiming strategy), voluntary suspension will be relegated to those unique scenarios where someone truly started benefits early, has had a change of mind and wants to stop them (after a year has passed and it’s already too late to withdraw the application) to earn delayed retirement credits, with the plans of starting benefits again at age 70. Of course, ideally those who wish to delay benefits for the value of earning delayed retirement credits will simply delay from the start to maximize the benefit, which makes voluntary suspension a moot point altogether for most retirees in the future!
(Michael's Note: This article was updated at 5:03PM EST on Wednesday with additional information as the House adopted an amendment to the original rules, specifically pertaining to grandfathering certain file-and-suspend provisions. Sections of this article no longer applicable due to the new amendment are noted as strikethrough.)
(Michael's Note: This article was further updated at 10:21PM EST on Thursday with additional information about a subsequent Senate amendment clarifying the effective date for ending File-and-Suspend, and clarification about the ability to reinstate prior suspended benefits.)
(Michael's Note: This article was further updated at 11:36PM EST on Monday November 2nd to reflect today's passage of the H.R. 1314, the Bipartisan Budget Act of 2015. If I'm counting days correctly, that means the effective date for the new file-and-suspend provisions will kick on after April 30, 2016.)
For further details on the effective dates of the legislation and planning around those deadlines, see "Navigating The Effective Date Deadlines For The New File-And-Suspend And Restricted Application Rules" as well.
File and Suspend and Restricted Application under the Senior Citizens Freedom to Work Act
In 2000, President Clinton signed into law the Senior Citizens Freedom to Work Act, which was intended to increase the flexibility for seniors to continue working even while receiving Social Security benefits. Accordingly, the new rules eliminated the Earnings Test for those who had reached full retirement age (FRA), and gave those who were already receiving benefits at full retirement age the opportunity to suspend their benefits to earn delayed retirement credits.
While the original purpose of these “voluntary suspension” rules were simply to allow those who had already claimed Social Security benefits to cease receiving benefits and earn delayed retirement credits, a secondary strategy emerged soon thereafter – retired couples could choose to file for benefits at full retirement and then immediately suspend. The reason: by filling for benefits, a spouse or even dependent children could become eligible for their benefits, and by suspending the primary worker could still not receive benefits and earn delayed retirement credits. This was far more appealing than the prior alternative, where if the primary worker wanted to earn delayed retirement credits by waiting until age 70, all related benefits were held hostage until that time as well.
A related strategy under these new voluntary suspension rules for couples was to file for benefits at full retirement age (FRA) – both retirement and spousal benefits – but then immediately suspend the retirement benefit and only receive the spousal benefit instead. The effective result was that a spouse could choose to claim “just” a spousal benefit from FRA until age 70, and then reactivate and switch back to the original retirement benefit. In the subsequent years, the Social Security Administration even expedited the process by formalizing the rules to “restrict the scope of their Social Security application” (or “file a restricted application” for short) to receive just spousal benefits and not individual retirement benefits.
Section 831 Of The 2015 Budget Legislation Closes Social Security “Loopholes”
While these File-and-Suspend and Restricted Application strategies were entirely legal and permissible under the Social Security rules as a part of the new voluntary suspension rules under the Senior Citizens Freedom to Work Act, it was not entirely clear that Congress truly intended to make such “claim now, claim more later” strategies so popular for married couples. Within a decade, the Center for Retirement Research was estimating that the availability of these strategies could “cost” the Social Security Administration as much as $9.5B in additional benefits being paid out every year (if everyone did it), with a slight skew towards those at higher income levels (46% of the additional benefits being paid out to the top two wealth quintiles), and the biggest additional benefits going to households that otherwise had similar earnings between spouses.
Given this dynamic, some began to call the Restricted Application and File-and-Suspend rules a form of Social Security “loophole”, and by 2014 President Obama’s budget proposal for FY2015 was calling for a change to the rules to “prevent duplicative or excessive benefit payments” including “aggressive Social Security claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits.”
And now, the so-called “Bipartisan Budget Act of 2015” negotiated and expected to pass later this week would shut down these strategies altogether, under Section 831 entitled “Closure of unintended [Social Security] loopholes”. (See here for full text of the legislation)
Deemed Application For All “Claim Now, Claim More Later” Restricted Application Strategies
Under the standard rules for Social Security benefits, anyone who applies for an early (i.e., “reduced”) retirement benefit or spousal benefit is “deemed” to have applied for any/all eligible benefits. As a result, early retirees have always been required to file for and claim all benefits they are eligible for, and since it wasn’t possible to voluntarily suspend retirement benefits before full retirement age, the claimant would be “stuck” claiming all benefits (which in practice means simply getting a benefit check for whichever was greater, individual or spousal benefits).
With the new rules under Section 831 of the Bipartisan Budget Act, Section 202(r)(1) of the Social Security Act is altered to expand the deemed application rules from applying only to early benefits to instead applying to all benefits regardless of age.
Thus, anyone who is eligible for a wife’s or husband’s spousal benefit is deemed to have filed for their old-age retirement benefit as well, and similarly anyone who is eligible for a retirement benefit is deemed to have filed for any spousal benefits to which he/she is entitled.
The end result is that it will no longer be feasible to file a restricted application, as any retiree who files for one benefit (retirement) is presumed to and deemed to have filed for the other (spousal) benefit as well – regardless of whether it was/is an early benefit or at full retirement age. (On the other hand, it appears that Social Security survivor benefits will still be eligible for claiming separate from retirement benefits, allowing widows/widowers to still optimize the timing of when to start each.)
Effective Date For Elimination Of Restricted Application
Notably, though, the new rules for restricted application applies only to those who attain age 62 in any calendar year after 2015. Thus, today’s retirees who are at FRA (or simply who are already at least age 62 in 2015, born in 1953 or earlier) will still be able to utilize a restricted application. Only future retirees – those who turn 62 in 2016 or later, which means those who would have been planning to engage in a restricted application in 2020 or later – will lose access to the Restricted Application claiming strategy. Or viewed another way, anyone born in 1953 or earlier is "grandfathered" and will still be able to engage in Restricted Application in the future (since they remain eligible based on birth year, even if they don't turn age 66 until 2019), while anyone born in 1954 or later will never be eligible to do a Restricted Application.
Suspending All Benefits Under File And Suspend
To further limit some of the perceived “loophole” abuses under voluntary suspension claiming strategies, the Bipartisan Budget Act also includes a new Social Security Act subsection 202(z), which stipulates that if an individual chooses to suspend benefits, then:
1) All benefits payable to that individual will be suspended, based on both his/her own earnings record (i.e., retirement benefits) and also based on any other person’s earnings record (i.e., spousal benefits).
2) No other individual will be eligible for benefits based on the earnings record of the person who voluntarily suspends benefits.
The first prong of these new rules puts yet another nail in the coffin for any type of restricted application strategy, as not only will the deemed application rules require that if an individual is eligible for one benefit then both must be claimed, but for those who suspend a benefit, both must be suspended.
The second provision, however, effectively kills all of the File-and-Suspend strategies as well. After all, the whole point of the file and suspend strategy was that if one person (e.g., the husband) files and suspends benefits at full retirement age, he can earn delayed retirement credits while making his wife eligible for spousal benefits. Yet under these new rules, when the husband suspends, it suspends not only his benefits, but all benefits payable based on his earnings record, which means he would no longer be able to trigger spousal benefits either (because his wife’s spousal benefit is based on his earnings, which are no longer considered).
And notably, because the new rule applies to any other individual receiving benefits based on the primary worker’s earnings record, a voluntary suspension of benefits would trigger a suspension of the individual’s own retirement benefits, and any spousal benefits he/she is eligible for, and anyone else’s spousal benefits that person was eligible for, and even any dependent benefits being paid based on that parent’s/worker’s earnings record!
(In point of fact, the new suspension provision is so broad, it may even unintentionally limit access to an ex-spouse’s divorced spouse benefits if the primary worker spouse voluntarily suspends, although this was likely not intended and will hopefully be fixed before the effective date for the new rules!)
Effective Date For Ending File And Suspend Impacts Current Retirees
While the new rules on deemed application rules limiting Restricted Application will only apply to those who turn age 62 beginning in 2016 or later, the new rules limiting suspended benefits will apply to anyone who tries to file-and-suspend after a 6 month grace period beyond the effective date of the legislation. This 6-month "grandfathering" window was created in a subsequent amendment to the original legislation. (Or at least, the Social Security Administration is authorized to begin applying the new rules within 6 months of when the legislation is passed.)
Given the legislation was signed into law on November 2nd, 2015, this means the 180 day period will close on April 30th of 2016, after which the grace/grandfathering period is over, and any filing of voluntary suspension will trigger the new rules. Thus for those who are not FRA by next April 30th, file-and-suspend will effectively be "off the table" (and won't remain open based on birth year the way Restricted Application will be).
Those who are already eligible (or will become eligible very soon) may wish to be even more proactive about engaging in the File-and-Suspend strategy while possible. And anyone who won't even reach the full retirement age of 66 until after the effective date will simply be "out of luck" for the file-and-suspend strategy. any benefits being paid in relation to an individual who suspended his/her own benefits may no longer payable. Which means couples currently receiving a spousal benefit under File-and-Suspend may find their checks cease once the effective date has passed!
Of course, the maximum benefit that a spouse could claim under File and Suspend was limited to 50% of a worker’s Primary Insurance Amount (PIA), which would be 50% x $2,787.80 = $1,393.90/month, or about $16,700 per year. And at the most, the strategy would only unlock four years’ worth of benefits (from when the retiree reached full retirement age at 66, until age 70 when benefits would have started anyway). Nonetheless, the new rules could cut off as much as about $67,000 of benefits over a 4-year time window for those who planned to engage in File-and-Suspend and as much as 3.5 years of benefits for those who were already receiving File-and-Suspend-based benefits (if the Social Security Administration promptly enforces an effective date in 6 months).
For those who want to ‘undo’ the impact of losing benefits under these new rules (if they do suspend and lose benefits), and/or to just activate their individual retirement benefits in order to also continue receiving spousal benefits, they will be required to file for a reinstatement of voluntarily suspended benefits to “re-start” both the spousal benefits and begin their own. Or alternatively, the retiree can continue to delay his/her individual benefits until age 70… recognizing that will now also delay a spousal benefit, too, and may delay a dependent benefit so far out that the child will be too old to receive dependent benefits when the time comes!
Start Stop Start – Voluntary Suspension Of Social Security Benefits Still Exists
Notwithstanding all the new changes to the Social Security rules to limit the File-and-Suspend and Restricted Application claiming strategies that were created when the Senior Citizens’ Freedom to Work Act was passed in 2000, the original rule allowing for voluntary suspension of an individual’s retirement benefits remains in place.
Now more narrowly construed, the rule exists for those who started retirement benefits early (prior to FRA), who have now “changed their mind” and wish to delay Social Security benefits and earn delayed retirement credits (especially in light of today’s low return environment and the appealing implied return of delaying Social Security). Given that the Social Security Administration shut down the “withdraw-and-reapply” Social Security strategy 5 years ago, voluntary suspension remains the only way for someone who has a change of mind (or circumstances) and wants to earn delayed retirement credits after having already received benefits for at least a year.
A voluntary suspension will also remain relevant in other limited scenarios, such as individuals (not couples) who wish to engage in the strategy simply so that they have the option of changing their mind and reinstating benefits between full retirement age and age 70 (which allows them to get all of their benefits paid retroactively back to full retirement age if they have a change in health and decide it wasn’t valuable to delay after all). For those approaching age 62 with young dependents, where it may also still be appealing to file for benefits early to get retirement and dependent benefits, and then suspend at full retirement age (after the children may no longer be eligible for benefits anyway) to still earn the delayed retirement credits later. Or perhaps even those who have started Social Security benefits earlier given the looming “Hold Harmless”-driven 52% spike in Medicare premiums, who will choose to suspend later to earn some delayed retirement credits (although notably, the new legislation also contains at least a partial fix for the premium spike, but it appears to simply spread out the impact of the spike, not eliminate it). On the other hand, the strategy to file-and-suspend for benefits individually, with the plan/option to reinstate them like (and get prior benefits repaid retroactively back to full retirement age) appears to be ended, as the new Social Security Act 202(z)(1)(A)(ii) limits a resumption of benefits in the next subsequent month or at age 70, but no longer contains the option to resume benefits in a prior month (as previously existed under POMS GN 02409.130). (Hat tip to Mike Piper of Oblivious Investor for spotting this crackdown on reinstatement of prior benefits.)
Overall, aside from a few of these somewhat esoteric circumstances, the new rules effectively kill most forms of file-and-reinstate, “claim now, claim more later” and “start-stop-start” Social Security claiming strategies. For everyone else, the decision of whether to delay Social Security to age 70 or not will simply be evaluated by the implied value of delaying all of a person’s individual and spousal benefits. Which means delaying one person’s benefit effectively holds all spousal benefits hostage in the meantime! Of course, in situations with married couples, where it rarely pays for both spouses to delay Social Security benefits, one spouse may start early and the other will delay, but again no spousal benefits will be payable for either spouse until that delay is over!
Ultimately, it remains to be seen whether this budget legislation will be passed into law in current form, although the reports out over the past 24 hours indicate that both the White House and Congressional leaders are backing the compromise and that it will pass later this week. Which will immediately start the clock on the end of restricted application for anyone not already age 62 by the end of this year, and means that even with a final amendment to grandfather current file-and-suspend beneficiaries, anyone planning to do so in the future may have just 6 months to become eligible and get it done, or be out of luck! any spouses receiving spousal benefits under file-and-suspend may find those spousal checks terminated next spring (at least until the couple ends any voluntary suspensions of benefits!).
For further details on the effective dates of the legislation and planning around those deadlines, see "Navigating The Effective Date Deadlines For The New File-And-Suspend And Restricted Application Rules" as well.
So what do you think? How will this impact the Social Security planning discussions you have with clients? Do you have any clients whose plans will be 'derailed' by the change in rules going forward? How many of your clients had planned to file-and-suspend but it would have been more than 6 months out, and now they'll no longer be eligible? currently receive Social Security benefits under a File-and-Suspend strategy who will find it curtailed in 6 months? Please share your thoughts in the comments below!
Sounds like the beginning of Social Security getting more solvent. Further means testing can’t be far behind. The benefits becoming less and less reliable and why retirees might want to file early and buy a QLAC at 80 to plan for longevity. I think most people would rather trust an insurance company rather than the federal government.
SS is still the best annuity money can buy, and even better when you defer. Early claiming should be needs-based, not for anyone that can afford to wait.
So I should forego $185376 before 70 and wait till 80 to have a break-even recovery? Yes after 80 I will need a QLAC but with the politicization of Social Security and comments like “not for anyone that can afford to wait” as opposed to what the law is which scares those of us forced to pay for 35+ years who just want some payback.
Delaying Social Security is actually so ludicrously valuable that EVEN IF we fail to fix it at all, and have to cut benefits in the future, it’s STILL better than any other fixed income investments available today. See https://www.kitces.com/blog/how-delaying-social-security-can-be-the-best-long-term-investment-or-annuity-money-can-buy/ for further detail.
And if you want to look at the history of politicization of Social Security, our ways of handling this are remarkably consistent – we “always” make changes that impact future retirees, and don’t make cuts to current beneficiaries. So the odds that as an 80-year-old in a decade or two you face a benefit cut is incredibly low – and again, EVEN IF THAT HAPPENS it still has a better implied return that available bonds today…
– Michael
Actually QLAC payments are DRASTICALLY worse than Social Security benefits. Even if we let the trust fund spend down to $0 and had to cut benefits by 25% for the rest of the century, delaying Social Security STILL beats a QLAC. I covered this in depth in my newsletter issue of The Kitces Report on QLAC contracts last year.
– Michael
Thanks for your reply. But your article compares buying a SPIA at 70 NOT purchasing a QLAC say at age 56-62 and having it kick-in at 80 which: lets you spend $ from 62-70 versus buying a SPIA: removes the guesswork from what will Congress do to my payments; covers longevity risk as well as Social Security as the payments start at the cross-over point-age 80 and pay for life. Simply I don’t trust future politicians NOT to means test or limit payments and prefer not to wait till age 70 to get any $ back from 35 years of forced payments.
If you’ve already made your own conclusion based on your personal views that Social Security is going to zero, then no amount of data or analysis is going to be relevant.
Well I have a CFA and RICP so am not just listening to doomsayers on Social Security I am looking at actual QLAC’s and actual guaranteed Social Security payments and I never mentioned that Social Security was going to ZERO-nor implied it- but was susceptible to not being received due to “means”testing. (Which is why I will be converting my IRA’s to Roth). In addition your charts and graphs do NOT explain what seniors will be living on from 62-70 and ONLY look at the Social Security returns as if they are an investment and don’t discount the time value of money at 62 versus the value at 80-if one survives.
James,
If you’re a CFA, feel free to run your own IRR comparisons. Then assume we completely fail to fix Social Security, cut it by 25% in 2033, and re-run the IRRs. You’ll find delaying Social Security is STILL better.
As for where the dollars come from in age 62-70, it’s the same issue whether you put your money in a QLAC so you can’t spend it during that time, or you spend it so you can delay Social Security during that time. Both scenarios are captured by doing an IRR analysis, as shown in the article, which implicit adjusts for the time value of money over the time horizon.
That aside, you may want to do some further research on the Social Security proposals and prospective paths for means testing. The version you seem to be implying is not being proposed by ANYONE, Democrats OR Republicans. The reality is that the system is ALREADY means-tested, in the form of the Social Security bend points used to calculate PIA in the first place, and that any/every proposal to accentuate the means-testing of Social Security would simply raise the wage base on earnings, apply a new bend point (which implicitly makes the system more means tested), and only impacts the future pay-in of future earnings and does not cause anyone’s currently-earned benefits to be reduced. Which, once again, simply reinforces the analyses I already published…
The idea that high-income earners would simply have their benefits taken away is not currently proposed by anyone, and actually doesn’t generate enough dollars to ‘fix’ the system anyway, which is why it’s been a dead-on-arrival proposal all along.
– Michael
Michael
Thanks for your reply.I am assuming an IRA of $500000 , investing $50000 at 56 in a QLAC versus spending down $184000 from the IRA before 70. And I listen to the Republicans like Chris Christie during debates say Social Security shouldn’t be for those who don’t need it I disagree there. The only real debate for a single filer is will you live past 80 as far as I can see and from what I hear at 80 there is nothing left to spend on but medicine. Thanks again.
Very confusing … perhaps someone can help clarify. Here’s an example: couple, ages 65 and 63 +10 months (meets the age 62 by 2015 criteria). The older spouse claims and begins receiving benefits at age 66 can the younger spouse still claim restricted, spousal benefits at age 66 and delay until 70 to claim higher benefit?
Earl – that was exactly my concern. This bit of change doesn’t seem to affect that strategy. Yet.
The short answer is yes, the younger spouse can still file a restricted application. The six month rule doesn’t apply to them because the older spouse IS receiving benefits. Of course, this goes away in a few years. – All according to Kitces.
Thanks so much, Michael!!
Clarification, on “this goes away in a few years”. By my back of the envelope calculations, there will still be individuals who are receiving “restricted applications” 8 years and 2 months from now. Correct?
No impact. They’re both already age 62 or older, so Restricted Application remains on the table.
Think of it this way: if you were born in 1953 or earlier, all Restricted Application rules will continue to apply to you, no matter when you do it in the future.
If you were born in 1954 or later, there is no more Restricted Application, ever.
And either way, File-and-Suspend strategies are dead in 6 months.
– Michael
Michael,
Can you clarify by what you mean when you say File/Suspend is dead in 6 months? Does that mean anyone who has already Filed and Suspended will be revoked, or that anyone who has Filed and Suspended by 6/30/16 will be grand fathered in?
Thanks!
Andrew
The original legislation would have killed payments of those who ALREADY suspended, starting in 6 months.
It got amended today. In the amended version, the crackdown will only apply if you DO the suspension (i.e., start/file it) more than 6 months from now. If you already suspended, you’re fine. If you suspend within the next 6 months (if you can), you’re fine.
– Michael
So is there a strategy for a married couple where one earner is over 62 now but not FRA and the spouse is younger than 62 to file and suspend within the next six months to make the spouse eligible for spousal benefits at their FRA? OR because the one earner is 62 in 2015 the file & suspend option will be available to them in four or so years at FRA?
Julie,
No, because File-and-Suspend itself can only be done if you’re at least FRA, and neither of those is FRA in your example.
The spouse who’s over 62 will be able to do a Restricted Application in the future, but only because the other person ACTUALLY FILES for benefits (not related to File-and-Suspend which will no longer be available at that time).
– Michael
This is a bummer. But this move will help SS in the long run.
Note that the bill also eliminates the ability to obtain a lump sum reimbursement of voluntarily suspended benefits if one chooses to unsuspend.
It would appear that the incentive to defer until age 70 has become diminished, meaning more retirees will simply opt for receipt of their full benefits at FRA. The break-even cross over point or age has also been extended farther out into the future. Now what, mid 80’s?
These changes will result in significantly increased pressure on SS payouts in the immediate/near term future.
“This is significant, because once the new rules are effective, any benefits being paid in relation to an individual who suspended his/her own benefits may no longer payable. Which means couples currently receiving a spousal benefit under File-and-Suspend may find their checks cease once the effective date has passed!” Does this statement apply to couples who have already attained age 62 as well? In other words, does the recent change affect individuals who are already 62 at all?
My understanding from the article is that if they are only receiving the spousal benefit because the other spouse utilized file and suspend, then yes, it affects them even though they are over age 62. The earner would need to, I believe, resume their benefit in order to make spousal and dependents benefits available again.
Wording was changed. No longer says benefits payable after 6 months. Now says requests for benefit suspension after 180 days after the date of Legislative enactment.
Hi Michael,
Regarding the potential limitation for ex-spouses… the ex-spouse benefit was never contingent upon the ex-spouse actually filing for a benefit (per my understanding). They just have to have reached that age of 62 for the ex-spouse to be able to claim off of them, no filing required. So the ex-wife (for instance) who is trying to get benefits off of the ex-husbands record doesn’t have to wait until he files, she just has to wait until he’s 62. So I would think that, given the verbiage, that shouldn’t be affected.
But I had a question to clarify about who this affects. So anyone who is not 62 by the end of 2015, going forward, will always be filing for any benefits available, whatever is greater. If anyone is currently receiving spousal or dependents benefits solely due to the earner having utilized the file and suspend strategy, then those benefits could be cut off in 6 months?
We have, for instance, a married couple. Husband and wife both have the maximum benefits on their own work records, both over FRA. The husband retired. The wife filed and suspended. Husband gets spousal benefit. So unless the wife decides to go ahead and just resume her benefit, the husband will lose his spousal. Am I getting that right?
I love your articles. Keep it up!
“A voluntary suspension will also remain relevant in other limited scenarios, such as individuals (not couples) who wish to engage in the strategy simply so that they have the option of changing their mind and reinstating benefits between full retirement age and age 70 (which allows them to get all of their benefits paid retroactively back to full retirement age if they have a change in health and decide it wasn’t valuable to delay after all).”
From what I can tell, the ability of an individual to receive retroactive benefits after suspending is being eliminated.
Page 76 Section 3A
http://docs.house.gov/billsthisweek/20151026/BILLS-114hr-PIH-BUDGET.pdf
Ted,
Retroactive benefits is different than a reinstatement of previously suspended benefits. See https://www.kitces.com/blog/why-individuals-should-file-and-suspend-their-social-security-benefits-reinstatement-of-voluntary-suspension-versus-retroactive-benefits/
As far as I can tell, the provision in the proposed legislation only limits retroactive benefits (which were actually already limited here, this just ‘clarifies’ it), not the process for reinstatement.
Though I’ll try to dig in further to clarify.
– Michael
A Boglehead forum member pointed me toward (z)(1)(A)(ii). It looks to me that this is what eliminates the ability for retroactive unsuspension. It says that suspension ends “with the earlier of the month following the month in which a request by the individual for a resumption of such benefits is so received or the month following
the month in which the individual attains the age of 70.”
Mike,
I’m aware of the (z)(1)(A)(ii) provision. It references Social Security Act section 202(j)(4)(B)(iii) which limits “retroactive benefits… to which an individual becomes entitled for a month prior to the month in which the applications is filed.”
When you file and suspend at 66, you filed at 66. Requesting a reinstatement several years later is NOT a retroactive filing of benefits, because you are NOT asking for benefits to be paid back PRIOR to age 66. You’re requesting a reinstatement of benefits that were due AFTER you filed (but weren’t paid due to suspension).
So I don’t see how the (z)(1)(A)(ii) provision can limit the reinstatement of benefits payable AFTER you filed (and suspended); it only limits retroactive payment of benefits that go back PRIOR to when you filed.
So for instance:
Scenario #1: I suspend at 66. I wait until 69. I get bad news and decide I want to reinstate. I request a reinstatement of benefits back to age 66. They send me 3 years of checks.
Scenario #2: I suspend at 66. I wait until 69. I change my mind and request retroactive benefits payable back to age 68 ½ (going back 6 months).
Scenario #2 is retroactive benefits and NOT permitted under the new law.
Scenario #1 is a reinstatement of prior benefits and does still appear to be permitted (because the new law only restricts
retroactive elections, not reinstatement of a prior already-existing election).
– Michael
Michael,
Thank you for the reply.
We’re talking about different provisions. (z)(3)(A) is the one that limits retroactive benefits relating to (j)(4)(B)(iii).
(z)(1)(A)(ii) relates to when suspension ends. I’ve done my best to explain my reading here:
https://www.bogleheads.org/forum/viewtopic.php?p=2671652#p2671652
Mike,
Ahh, I see your point here.
Let me dig further, but I think you may be right. I was eyeing the “crackdown” on retroactive benefits (which I don’t think will accomplish the goal), but you make a good point that the limited scope of (z)(1)(A)(ii) to only resume in the next/following month, or age 70, may have killed this. The potential to reinstatement in a PRIOR month is notably absent from (z)(1)(A)(ii)…
But then again, I don’t think there was a prior law permitting prior month reinstatement either. It was an interpretation by SSA. But then again, the new (z)(1)(A)(ii) so specifically does NOT allow for a prior month, that it may have killed the SSA’s interpretation and FORCE them to only allow in a subsequent month, or age 70…
– Michael
Michael,
You wrote, “But then again, I don’t think there was a prior law permitting prior month reinstatement either. It was an interpretation by SSA. But then again, the new (z)(1)(A)(ii) so specifically does NOT allow for a prior month, that it may have killed the SSA’s interpretation and FORCE them to only allow in a subsequent month, or age 70…”
That’s precisely where I am with it at this point.
Thanks for taking the time to look into this and reply. It gives me an additional degree of confidence to see that we’re on the same page.
I’ve updated the article to reflect this. Thanks again for pointing it out Mike.
– Michael
Mike,
As a quick follow-up, I would note that I suspect the intent of the new provision may have been to prevent this strategy of benefits reinstatement to get a ‘retroactive’ lump sum.
I’m just not sure this particular version of the new rule, limiting retroactive benefits but not reinstatement itself, will accomplish it. Which may simply mean it’s a matter of time before its patched/amended to do so. :/
– Michael
When I went to SS to file & suspend, after getting incorrect info from the woman at the counter that “you can’t do that”, she added her own commentary that “you rich people are making SS go bankrupt” after her supervisor said I could file & suspend.
I’m not rich but I can manage my expenses while I file and suspend.
Filing and suspending and other strategies to maximize probable SS benefits isn’t “cheating” anymore than using deductions to legally minimize taxes but I could see that the Obama admin had declared war on SS recipients who weren’t living hand to mouth with SS payments. First it was the 12 month restriction on paying back after taking SS early at age 62, then using “hold harmless” rule to jack up Medicare for those who file& suspend and now this broader attack on suspenders.
This is just a first pass at means testing SS, eventually SS, which we all paid for, will be limited to the poor and “disabled”.
I’m sure there will be shock and amazement when when SS cash flow goes bad when the suspenders get squeezed back into drawing their benefits.
I ran into a similar attitude from a Social Security representative in that she tried to tell me that I did not need to file for spousal benefit off my wife’s Social Security, i.e. she thought we had enough money without doing so. When I asked why wouldn’t I file when it is the law and I am entitled to the benefits and she responded that she “guessed we would just have to disagree on that point”!
So here’s a scenario: couple is retired, age 66 (Wife) and 67 (Husband) – both are FRA. Wife started taking her benefits at age 66 (FRA) and the husband filed a restricted application only for spousal benefits at that time so that the benefits on his earnings would continue to grow.
Would the spousal benefits here be affected since it was not a file-and-suspend strategy, but rather a file and then the spouse files a restricted application?
Article says the legislative changes on filing a restricted benefits only applies to those who turn 62 in 2016 or later.
According to the proposed new rules, he’s over age 62 in 2015. Therefore, he won’t be impacted by the changes to filing a restricted application.
It was only a matter of time, imho, before this legal, but unforeseen/unintended way of gaming the system was corrected/eliminated. Personally, I’m glad they’ve finally gotten around to it because it’s not fair to the younger generations to have to give even more to the selfish baby-boom generation due to some crafty manipulation of a social welfare program.
It is not gaming the system. It is actually just being fair. The gaming of the system is the whole concept of spousal benefits. Why should a spouse who has paid nothing in get anything. Alternatively, why should a spouse who worked not get more than a spouse that did not work, or a spouse who worked effectively lose access to her spousal benefit
You are forgetting that the traditional economic model of the household was a breadwinner spouse and a homemaker spouse. That is the economic model that was promoted as being the most efficient and effective. Clearly, the model is changing today; but, for those who followed it for 30 or more years, the spousal benefit is fair pay for a life spent working without receiving wages.
I am not forgetting. The “traditional” model was obsolete 50 years ago. But even in the traditional model it made no sense. Working without wages does not contribute to the system. If you are doing that, then just call it what it is and call it welfare for non-working spouses. Earned benefits make sense. Survivor benefits make sense. Extra benefits for a non working spouse makes no sense in a retirement program. Never did.
It depends on whether you consider Social Security a reward for being a good worker bee, or whether you believe there’s any societal responsibility to ensure that elderly people can have a decent standard of living. In my divorce work I still see that the spouse who dedicated herself to raising the kids is heavily penalized over the spouse who worked and farmed the kids off to the nanny to raise. And Social Security is already so pathetic compared to what it actually takes to live when you’re elderly that we should all be considering how to raise benefits to the level of a decent retirement, as Social Security was intended to be, and which is offered by every other Western democracy, not finding ways to screw the elderly.
It is a retirement based on your work record. If you have no paid work, then you should have no paid benefit. We already have programs to help non-workers survive, the are called welfare. As funding for a “welfare program”, the flat payroll tax is very regressive. And sorry, why should an old person who hasnt worked be entitled to more than a young person who hasnt worked. Frankly most retirees would revolt at the thought that their SS is really welfare.
And as far as divorcees are concerned, that is what divorce settlements are for.
Actually social security is neither “a retirement” nor welfare. It’s “insurance” which covers old age, survivors and people who become disabled before reaching retirement age. Says so right in the formal name. Your opinion of who should received the benefit of the insurance is simply your opinion.
Well, if you want to get technical, S.S. is a wealth transfer tax structured to mimic an annuity policy (insurance). The original intent of SS was to reduce poverty among the elderly. The precise impacts are for us to decide on. As a program, SS has been very successful in achieving it’s aim; poverty among the elderly has declined from over 60% to below 20%.
I am 55 and on SS Disability. Will the new legislation impact me? My husband is 66 and draws his full Social Security. I do not get spousal payments.
andi, I simply am not qualified to provide a definite answer to your question. The focus of the new legislation would not appear to impact people in your situation, so I would guess that you should not see any changes, but….there is an old statement that ‘a little knowledge is a dangerous thing’.
It would be wise to get professional help. I’d suggest a discussion with a fee-only financial/retirement expert who specializes in those with disabilities. Not only could they confirm the answer to your question, but there may be other SS benefits you were not aware of, now or in the future.
Best of luck to you.
SS was never intended to be the sole source of income for retirees.
That may be, but when S.S. was last significally modified in 1983, people still worked for companies who provided defined benefit plans. Now YOYO, and for many people putting 10%-15% per year away for retirement would result in the inability to pay for basic necessities.
Having grown up in a mill town, I am all too familiar with the decline in employer-provided pensions. But even at their peak, fewer than half of private-sector workers in the US were covered by such pensions. If we are going to change SS from a social-insurance program into welfare because of fundamental changes in our economy, we need to look at that very openly and deliberately.
Yeah that may be but a lot of us also didn’t plan on our jobs being shipped overseas!
In Canada their retirement benefits are so far inferior to U.S. Social Security, to be a joke. I did not appreciate as much, my U.S. S.S. benefits until I saw what my Canadian partner was getting…so I question the “other Western democracy” statement.(However, the free health care here, is a god send)
That “selfish baby boom generation?” Really! It’s my understanding that my generation has been paying DOUBLE into social security to pay for our parents retirement AND our own!
Can anyone answer this scenario question for me? My husband is 80 yrs. old and has been receiving his full benefits since he was 65. I am 63 and will not retire till the age of 66 in 2018. I planned on receiving the amount of half his benefit until I reach the age of 70. Will that be completely taken off the table for me now?
Bonnie,
Because you’re already at least age 62, you will remain eligible to file a Restricted Application for just your spousal benefits at age 66, and leave your individual benefit accumulating until age 70.
However, depending on the size of your benefit relative to your husband’s, and your respective health status, it may not be best for you to delay given the potential survivor benefit in the future. See https://www.kitces.com/blog/why-it-rarely-pays-for-both-spouses-to-delay-social-security-benefits/
– Michael
Hi Michael,
I’m a little confused. As it stands now, is the 6-month timetable related to the actual filing for spousal benefits or is it related to being age 62 within 6 months of the legislation being enacted? Your article implies that filing a restricted application for spousal benefits is off the table in 6 months of the legislation being enacted.
File-and-suspend is off the table 6 months after the legislation is enacted.
Restricted Application remains on the table, even years from now, as long as you were at least age 62 by the end of this year (in other words, born in 1953 or earlier).
– Michael
Please help me out with this scenario: Husband is age 67, began receiving SS at age 62. Wife will have the higher PIA, turns 65 in Nov 2015. Husband suspended his SS effective April 2015 (no check received in May 2015). Planned to resume receiving SS after 10 months (as recommended by a computer analysis), ie, resume SS effective February (1st check received in March 2016). Wife would apply for spouse only SS benefits at age 66 in Nov 2016 and earn delayed credits until age 70 in Nov 2020. In order to avoid the increase in Medicare Part B premium from $104.90 to $120 + $3 loan repayment, should the husband reinstate his suspended benefits effective December in order to have the Medicare Part B premium deducted from his SS check so that he would qualify for “hold harmless”? That would cut his suspension from the recommended 10 months to only 7 months. It may not seem like it would be worth worrying about an increase of $18.10/mo. However, the extra $3 per month may have to be paid for years until the “loan” is repaid. Assuming he does reinstate effective November, could he suspend again effective January 2016 for 3 months to finish out the recommended 10 month suspension? During that 3 month suspension, he would have to pay the Part B premium directly to Medicare. Does anyone know if Medicare would continue to bill him the $104.90 rate or would they be able to increase his rate to the new rate (proposed to be $120 + $3)? If Medicare would not be permitted to raise his rate, then it looks like it would be wise to reinstate and then suspend again for 3 months and then reinstate again effective April 2016. That would accomplish the original 10 month suspension and lock in the lower Medicare Part B premium. In regard to the wife, should she stick to the original plan and wait until FRA of 66 in Nov 2016 to apply for spouse only SS benefits or should she file for spouse only SS benefits at age 65 (1 year before FRA) and receive spouse only benefits for 5 years instead of 4 years at the 45.x% instead of 50% level in order to qualify for “hold harmless” and thus avoid the higher Medicare Part B premium. However, if the husband suspends effective January through March 2016, would the wife be able to receive spouse only benefits off his account during those 3 months in light of these new limitations? Per phone call to SSA, the wife’s benefits at age 70 off her own account would not be reduced because she applied for spouse only benefits off her husband’s account one year before she reached FRA. Is that correct? SSA stated that both the husband and wife would have to do this by Friday of this week. Both the husband and wife have already paid the Part B premium to Medicare for November and December and January. SSA or Medicare (not sure which) said that this would not be refunded but they would not be charged a premium in a future month. Could this potentially cause both of them to fall outside of the “hold harmless” group simply due to processing issues?
From a pure political point of view, past attempts to “fix” social security do not even get a chance to be discussed. Now it can be said that the politicians “messed with your social security” behind closed doors and from what I can tell, the financial planning community had no input.
you are correct. it also saddens me that aarp never, ever weighed in on this and even now has just a short blurb on their web site. i usually looked to them to champion old folks’ interests.
Divorced age 65 turns 66 in May 2016 (8 mos). Still OK to file restricted application at FRA and defer hers until age 70?
What happens when spouses are on opposite sides of the age 62 restriction?
Husband over 62 [64], higher earner
Wife under 62 [61]
When husband is 66 can he claim spousal benefit and restrict his to 70, given she starts hers at 63, reduced from FRA by 20%?
I’m curious about this as well. If we are to take this all literally, and apply it literally then I’d think that… the husband can’t utilize file and suspend because he’s not going to be FRA within the next 6 months, so that’s out the window. He COULD file a restricted application, IF his wife files for her benefit (once he’s FRA, and once she has filed for her benefits and continues to receive them). However, it would seem to me that the wife, on the other hand, would be unable to file a restricted application when she’s FRA. She just doesn’t have that capability due to her age. I would think that’s how it would work unless they allow the younger spouse to grandfather in as well, but part of me doubts it.
In addition to the fact that these changes were done outside of a public discussion/debate on SS reform, it bugs me that couples where one spouse was already drawing benefits were not grandfathered in even if the other spouse was born in 1954 or later.
My husband will turn 66 in November. He did apply for Social Security and should get it the month of November and December 2015. I started taking SS in Sept 2015 when I turned 65. He will retire December 31st. He and I are under his work insurance until Dec 31. We will be subject to IRMAA. The question is should we apply for Medicare B in December or January? We plan to file SSA 44 for life changing events due to retirement.
Sorry to ask surely duplicate dumb question, but we are 68.5yo m3 and 66.5yo wife and already did the apply and delay (technical terms for file and suspend) — meaning wife gets half my benefit and I will get full in 18 months at 70. Or that was the plan and the budgeting. What happens when you are in mid-process like this? Do I have to do something in six months?
David,
No impact. You’re grandfathered and in the clear already.
– Michael
tyvm, tyvm, hard to believe it holds to (for) 4/2017
It is about time that Congress acted to close this egregious loophole that benefitted the richer people at the expense of the system. The main losers, aside from those who will lose the loophole are the consulting firms showing the 10,833 scenarios in which to increase your payout. FDR is rejoicing in his grave that simplicity is being restored.
For what it’s worth, there’s actually very little evidence that this was actually being used exclusively/primarily by “richer” people. Ironically, even the Social Security Administration didn’t have data to track how many people were doing this. :/
In point of fact, the crackdown on Restricted Application impacts dual-earner households, which arguably is most of the middle class right now (not just a high-income thing).
Though in practice, I wouldn’t be surprised to hear that it was being used more by higher-income folks, if only because the average American still didn’t understand these rules and how they work, while advisors working at the higher end of the income spectrum were more likely to proactively advise doing it.
But that means it was only being used primarily by higher-income households because the government communicated the opportunity so poorly to everyone else, not because higher-income households were the only ones who could/would benefit.
– Michael
actually, per the SSA, less than 2% of filers choose to wait beyond FRA at all. Michael, this is great information, by the way, as always.
I agree, great information as always. These are not necessarily strategies for the “rich”. In fact, of the clients we have recommended use these strategies, most would be considered “middle class” by net worth standards. Loophole or not, there should have been more discussion on what was happening and at least a more lenient “grandfather” element as we have many who are not too far away from retirement where these strategies play a significant role. Thanks for all your information on this Michael.
Or maybe because they didn’t anticipate so many people who didn’t need the benefits to so greedily jump on the bandwagon.
If I pay in for 40 odd years, and already I get a far smaller percentage of what I paid than most everyone else, why wouldn’t I jump on the bandwagon. It’s hardly being greedy when I’m still paying for far more than my guaranteed share. Besides, who the heck are you to judge who is being greedy? Just because I made more money, doesn’t mean I don’t have ongoing responsibilities. I guarantee you the gov’t won’t take care of my special needs child when I’m gone, so yes, I’m going to take every penny I can get to make sure he’s not tossed on the street after I pass away. Frankly, I don’t begrudge Warren Buffet taking SS, if he wants. He earned it. He’ll give it away to charity anyways.
First of all the government will take care of your child when you’re gone…it’s called SSI and/or Medicaid and we as a nation pay for that because I am my brother’s keeper!
Second, when you pay into auto or health or home insurance and you never have a claim, do you think you should have your premiums returned at the end of your life plus interest?! It’s insurance against old age poverty if you don’t have anything else to fall back on. Most people don’t have enough or nothing at all so they “need” it.
Not sure what your point is!
I’m sorry for your difficulties. I pray that everything works out for your child! It can’t be easy!
Blessings to you!
SSI and Medicaid, like so much of our world, works much better with an advocate. I place little faith in that approach, though it may be necessary at some point.
However, I believe we disagree on what SS is. Is it a form of welfare, only for the needy? I think we’d both agree in the value of such programs. However, while SS is an anti-poverty program, it’s designed to mimic an annuity, which is a type of insurance product that does return money to you (plus interest). It was always designed to be a supplement to the income of all Americans. The government has already tilted the payments to provide much greater benefits for the most needy. Even the very rich can be quite unwise with their oney… I see SS as an integral part of everyone’s retirement plan, but only a part of it – everyone has to rely on themselves to build savings towards the lifestyle they want. That’s why I don’t see anybody as greedy for taking their SS as promised.
Thank you for your good wishes, best of luck to you.
It is wrong to say this provision only benefited rich couples. I am currently receiving spousal benefits, following suspension by my wife. Neither of us is rich, by any definition. We both have work histories of 35 years plus (that’s 70 payroll years going into the SS fund), during which time we earned under the FICA payroll limit in all but 4 years ( and in those “high income” years, the best I did was to exceed the FICA max by $10,000). I never viewed this provison as unfair. In fact, I think it helped dual income families such as mine, who paid twice as much into the system, to even up a bit with a single earner whose spouse gets a SS check after paying nothing in.
I never stated that it only benefitted rich couples. There will always be some people who plan well and take advantage of provisions, who may not be “rich”, and you may use your definition of rich.
When you examine the demographics of those receiving benefits, you will find that the it is confined to higher income folks. Even the author of the article acknowledges that there is some evidence – note he said very little, not none.
“… that benefitted the richer people at the expense of the system.” Your default assumption [shared by many] assumes that all folks taking advantage of this [now defunct] option were rich. In my case far from it but I did plan carefully so as to take advantage of the law. For planners it was a no brainer that unfortunately is no longer offered.
I have to agree! I’m 58 and divorced and even though it will affect me, I think it’s appalling how many people who already had plenty of other income streams were milking the system at the expense of people who really need it because their low incomes didn’t allow for aggressive investment strategies. Divorced spouses who didn’t go to university due to staying at home have been forced to enter the work force with lower wages and a shorter time span to accumulate benefits while these “entitled” boomers who don’t need it are gouging the system. It IS an insurance benefit for the elderly who do not have enough income to avoid poverty! “Greedy, Rich people need to give it a break! Get over it! I’m going to have to and I probably will have to work until seventy while you’re living on a retirement benefit that’s higher than my working income!
You may be able to take spousal benefits vs your own. I believe you have to have been married 10 years. Spousal benefits were designed for cases where one partner sacrificed for the family.
First off, I want to say how impressed I am with this article. You really put tremendous effort into making it relatively easy to understand, compared with the copious amounts of gobbledygook I’ve read thus far! Major kudos to you!!!
I would like to run my scenario by you, if you don’t mind. I have been permanently disabled for some time now (age 59). I am receiving SSD. My husband, when he reached FRA last year, filed what I think would be termed a restricted application. He is 67 and is receiving spousal benefits (50%) based on my SSD and is planning on switching over to his own benefits in about a year. Will this new bill, in its amended state, affect us? Also, what happens when he claims off his own record in a year. Does he then lose the spousal benefit? And, when I get to FRA, what happens given I am on SSD? Thank you so much for any light you can shed.
Because your husband is already over the age of 62, these rules have no effect on his Restricted Application. He is not impacted. Under the standard rules for Social Security, when he switches from spousal to individual retirement benefits, he will get that check instead if it is bigger (not both checks, just whichever is bigger).
– Michael
Thank you! Just one question left… When I get to FRA, does my SSD switch over to “regular” SS? Will my benefits then be reduced to 50% of his? I am pretty confused given the whole disabled element.
If I were to boil this all down in a few sentences, is this correct?
1. For anyone turning age 62 after 2015, file and suspend as well as restricted applications will never be available.
2. For anyone who is already at least age 62 in 2015, file and suspend will remain available as a viable option to begin within 6 months before the option goes away, but restricted applications will still be available for this cohort going forward.
3. The under age 62 (in 2015) cohort will be fully under the “deemed filing” rules from age 62 to age 70, so that they will not be able to pick and choose which benefit to receive or delay.
4. As of now, we aren’t entirely clear what’s happening with some other benefits such as the retroactive filing (up to 6 months prior), the lump sum “trick” (forgot the proper name), or the impact this might have on divorced spousal benefits?
Daniel,
Yes you’ve got that right, with the caveat at the end:
– Retroactive filing into suspended periods is definitely dead
– The “lump sum trick” is probably dead, as I concur with Mike Piper’s evaluation of the provisions
– Restricted Application definitely applies to divorced spousal benefits. The only question is whether there’s a scenario where a vindictive ex-spouse could SUSPEND benefits just to try to cause the SUSPENSION of an ex-spouse’s spousal benefits (I’m sure that wasn’t intended, and if it is an outcome, will be patched/amended… but it’s still vague right now).
Michael, so for divorcees who can use a restricted app, is their ability to get benefits now dependent on the ex receiving theirs?
No, still based on just whether the ex is 62. But the divorce spouse’s ability to file for ONLY a spousal benefit is a form of Restricted Application, so no longer available unless the spouse was born in 1953 or earlier.
This is some question about whether an ex-spouse who SUSPENDS could cause the other person’s spousal benefit to become suspended as well. If so, this would be a very unintended consequence, and probably fixed by a future patch/amendment if the Social Security Administration doesn’t have the leeway to resolve the issue directly.
– Michael
Hi Michael,
In response to my original post above, I wanted to clarify something. Our home office came out with a very brief explanation of the changes. One of the things that they SEEMED to be saying, was that anyone who is able to do the file and suspend strategy, has 6 months to utilize it, but that at the end of that 6 months, nobody will be able to receive any benefits due to the suspension (so someone MIGHT be able to get, at most, 6 months of this benefit, but it’s going to get cut off for everyone on May 2). Is that your understanding? Initially, I thought they were saying that, if you filed and suspended before that window closes, then you can keep it ongoing. But now it sounds like it’s going away outright.
Thanks!
Michael,
I’d sure like to see your answer to Daniel Mulligan’s posted question.
More Specifically,
For a person currently taking advantage of File & Suspend and a spouse currently using a restricted filing to get spousal benefits while still accumulating delayed retirement benefits (up to 132%), will the spouse’s benefits or delayed retirement benefits stop on April 30, 2016? (180 days after the bill’s passage.)
Michael wrote a new article about this and I think it answers the question. The new law would not affect those who file and suspend before that 180 day mark. Here’s the link to the new article:
https://www.kitces.com/blog/navigating-the-effective-date-deadlines-for-the-new-file-and-suspend-and-restricted-application-rules/?utm_source=rss&utm_medium=rss&utm_campaign=navigating-the-effective-date-deadlines-for-the-new-file-and-suspend-and-restricted-application-rules&utm_source=Nerd%E2%80%99s+Eye+View+%7C+Kitces.com&utm_campaign=41bedd22c0-NEV_MAILCHIMP_LIST&utm_medium=email&utm_term=0_4c81298299-41bedd22c0-57049805
Michael,
My wife turns 62 in Oct 2016 and I will be 58, We are retired and had planned on her doing a file & suspend and myself claiming spousal benefits. Sounds like this is now off the table. Are we able to have her file and collect her full benefit and I collect my spousal benefit as well (until I file for my benefits at 62 or beyond if I elect to delay)?
Chris you have the file and suspend all wrong in the first place. A person can only file and suspend if they are full retirement age. And spousal benefits are not available until age 62, but if one files for spousal prior to FRA the benefits are forever reduced. All mute anyway, because the rules just changed and neither you or your wife will be eligible for these strategies. Sad for a lot of folks who have been planning retirement and depending on these strategies.
I have a question based on the above question. I turn 66 before April 30th 2016 my wife turns 62 after April 30th sometime in May how does all this apply to us I was planning on filing for social security can she file for spousal (50%) at age 62 my 50% is going to be quite a bit greater then hers since she was a housewife for many years. We are both thinking of retiring sometime in 2016 anyway.
You have to be at least 66 to do file and suspend. So you would need to be 65 and 6 months as of today. Otherwise not available.
Regarding the “lump sum” strategy (or what I term the “stand-by life insurance strategy”), whether or not the drafters of the budget bill intended to kill it, I do not believe that it is dead.
The budget bill adds subsection (z) to the Social Security Act and the relevant part reads: ‘‘(3) In the case of an individual who requests that such benefits be suspended under this subsection, for any month during the period in which the suspension is in effect—(A) no retroactive benefits (as defined in sub-section (j)(4)(B)(iii)) shall be payable to such individual”. Sub-section (j)(4)(B)(iii) reads: “ . . . the term ‘retroactive benefits’ means benefits to which an individual becomes entitled for a month prior to the month in which the application for such benefits is filed.” (For example, when someone is inadvertently late in filing and asks for the filing to be treated as if made six months earlier under sub-section (j)(1)(B).)
In order to “request that payment of such benefits be suspended” under the new subsection (z), an individual must first (or at the same time) have filed an application for benefits, otherwise how could benefits be suspended? But under the above definition, a lump sum request under POMS GN 02409.130 (“Voluntary Suspension Reinstatement”) is not a payment of “retroactive benefits” since the amount requested relates to months AFTER the application for benefits was filed. So it seems to me that lump sum lives on for everyone.
my wife and I will turn 66 in july. can we apply for file and suspend?
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A spouse can no longer no longer recieve his/her spousal benefit if the other spouse has suspended his/her primary benefit. However, can a spouse claim his/her benefit, based on his/her earnings history record, while the other spouse delays filing to allow his/her benefit to grow? And, then, when the delaying spouse claims his/her now larger benefit, can the first spouse refile and now claim a potentially larger spousal benefit based on the spouse who delayed filing?
Spousal benefit is determine by primary earner’s PIA at full retirement age and is irrespective of whether the primary earner fills at 62 or 70, just that they filed. If the spousal benefit is higher than the one earned on their own earnings record, SSA will increase the amount automatically.
Ok I get that for an Individual born 1953 and earlier the rules for restricted application remain the same. Since lump sums are no long allowed, what is the difference between file and suspend at FRA and just delaying filing until you want to receive benefits prior to 70?
No difference I can think of at this point. If you’re going to delay, just delay. No reason to file and suspend to delay.
Voluntary suspension would remain relevant if you started EARLY (e.g., at 63) and then changed your mind at 66, wanted to suspend and delay until 70, and use delayed retirement credits to boost your benefit back up after filing early cut it down to begin with.
But I don’t see why anyone would file at 66 and suspend immediately under the new rules.
– Michael
Clarification here. If an individual does not file and suspend within the next six months, access to the spousal benefit (restricting application) is lost until the primary earner reaches age 70 or begins benefits. Correct? If this is true, everyone 65 and 6 months should file and suspend, just in case. Am I missing something?
No, these are COMPLETELY SEPARATE rules.
The spouse can file a Restricted Application if she’s entitled to a spousal benefit. That remains valid as long as she was born in 1953 or earlier (at least age 62 this year).
However, to BECOME entitled, the primary worker must file for benefits. In the next 6 months the primary worker could file-AND-SUSPEND. After that, the worker would just FILE.
So if I file for benefits in 2018, and my wife at the time is 66, she can go ahead and file a Restricted Application, because she’s grandfathered. I just can’t file-AND-SUSPEND in 2018. I’d have to file and actually GET my benefits.
– Michael
My point is that there is a reason to file and suspend in the next six months if higher earner was planning on delaying benefits until 70. In that case there is a difference
Correct, so as long as the primary worker ACTUALLY FILES, the spouse who was born in 1953 or earlier can do a restricted application.
Per my comment above, if I *FILE* for benefits (not file-and-suspend – FILE AND GET) in 2018 and my wife is 66 at the time, she can go ahead and file a Restricted Application. Because I filed for benefits.
The purpose of file-and-suspend was basically to FILE-AND-NOT-GET. That is dead. But you can still FILE-AND-GET. That’s simply how the system has already operated for decades.
– Michael
I suppose the original question did not differentiate between old rules and new rules. SSA is going to be slammed. I remember the how it was back when they closed the buyback loophole.
I am going to be 70 in August 2016 and suspended when my spouse reached FRA in June of 2014. She is receiving spousal benefits . Will we be grandfathered in or will her checks stop in May 2016? Do we need to take any action? Will she still receive DRC’s until she is 70?
My understanding is that you and your wife are being grandfathered in since you are both above age 62 as of 2015. Since you are already utilizing the file and suspend strategy for spousal benefits, you are also fine (since that option is being cut off in 6 months).
I am currently 51, and my ex-husband has passed away. We were married over 10yrs and I have not
remarried. When I turn 62, would I still be able to claim his SS benefits, until I reach 70 to collect my own, providing I haven’t remarried?