President Obama recently signed a budget deal that eliminated the “file-and-suspend” strategy used by many married couples.
What is the file and suspend strategy?
This strategy is when a spouse applies for Social Security retirement benefits and then suspends payment in order to trigger spousal benefits. While spousal benefits are being collected, the spouse that applied and suspended Social Security will have their own retirement benefits continue to grow by 8% a year until he or she reaches age 70.
This strategy can lead to a significant increase in Social Security retirement income for couples. There was no warning to the end of this; rather, the Social Security rule changes were slipped into a backroom budget compromise.
What are the effects?
Those who are already 66, or will turn 66 in the next six months, are still able to suspend-and-file under the old rules.
Those who turn 66 after May 1, 2016, will still be able to file-and-suspend, but their spouses and dependent children will not be able to collect benefits unless the primary beneficiary is also collecting benefits.