You know that budget deal that was just passed? Suspending the debt ceiling. I also read there were “changes to Social Security” which are not specified in most articles, prompting more google searching. I just found an article that says that the budget deal will eliminate the “file and suspend” social security strategy. I am really surprised and a little annoyed that they are making this change so suddenly - it will be effective in 6 months. In all my financial plans I had been planning on taking advantage of this strategy. I really can’t argue for it though. It is a “loophole” that never should have existed.
If you are unfamiliar with “file and suspend”, at age 66 I could have filed for SS but immediately suspend, so I don’t collect any benefits. Meanwhile, my wife could file for her spousal benefit and collect that until we both turn age 70. During that time period (age 66 - 70) while she collects the spouse benefit both of our own benefit would continue to grow 8% per year so when we both collect starting at age 70 we bet a maximum benefit. Basically you get a “free” monthly spousal benefit for 4 years. So we kiss that one goodbye. Where is the AARP? LOL, as I said, I can’t really argue in favor of keeping this.
Indeed. I’ve been saying they should eliminate File and Suspend for years. I am sorry it’s disrupting your plans. If it’s any help we never took advantage of it. It sounded a bit sneaky and we were naive and innocent back then.
I didn’t realize the strategy has only been available since 2000, and almost certainly was an “unintended consequence.” I am not going to cry about it, but sheesh… we are 62, and it would have been over $1k per month for 4 years (from age 66 - 70) or $50k total. (Honey, I’m not buying that Porsche after all!!) oh well…
Are you sure it’s gone? DH and I were planning to use that too.
Igloo, us too.
I just read the link in Post #3. I’m not happy. Not happy at all. This has been a part of my retirement strategy for five years now. IMO (and no one is asking me for my opinion) there should be a longer lead time to implementing this. Like, until after DH starts collecting my spousal benefit, which was going to be in January 2017.
@silverlady: You mean people who have already filed for this benefit and are receiving it will stop getting these checks? That would be very surprising.
Hmmm. From the Forbes article: “The amendments would apply to anyone who reaches age 62 after 2015.” So it might not apply to some of us oldies. (DH and I are already older than 62.)
I will never understand why the powers that be don’t raise the cap on the SS payroll tax contributions. Such an easy fix. Raise it enough to keep the benefits stable and solvent for the next 100 years, at whatever income level that means. I get so tired of hearing how the system is broken. So fix it, damn it.
People who have currently used file & suspend will not be affected. And, there is a grace period, but it won’t come soon enough for me. Anyone born in 1953 or earlier, however, will still be able to use restricted application, which permits an applicant to claim the spousal benefit at full retirement age, let his or her own benefit increase until age 70, and then switch over. It’s not a juicy a deal as file & suspend, but it still benefits some.
“I will never understand why the powers that be don’t raise the cap on the SS payroll tax contributions. Such an easy fix. Raise it enough to keep the benefits stable and solvent for the next 100 years, at whatever income level that means. I get so tired of hearing how the system is broken. So fix it, damn it.”
I thought that the main problem was not that the ss system was broken and couldn’t maintain itself, but that they used the money elsewhere. All those trillions of dollars are just used as a big government slush fund, for them to borrow on, not earmarked only for ss. As long as that happens, it will never be fixed.
Regardless, they raise the cap on payroll tax contributions every single year, I believe. It would be hard to justify raising it further to fund the scam that is the file and suspend. I don’t blame anyone for utilizing that option, but it is a scam, in my view.
Now if only I could hurry up and file for that scam before the deal goes away!
We’re not happy about this at all. We planned on using this system, and our latest financial plan included it. DH turns 61 this year, so he misses out on being able to use file and suspend by one year. He has earned substantially more than me, so he planned to file and suspend at his FRA while I could collect 50% of his SS at my FRA. I guess we won’t be doing that now.
You’re all mostly just slightly informed. The changes don’t completely eliminate the collection of a spousal benefit while letting your own benefit grow unless you are younger than 62 at the end of the year.
File and suspend ends six months after the bill is signed. Using a restricted application (filing for spousal benefits while letting your own earnings credit grow) is available in the future to those who are 62 by year end, although using that technique will require your spouse to begin collecting.
It requires decent reading and math skills from the reporters and the listeners.
The current problem is that disability claims are about to exhaust the disability trust fund. (the trust funds consist of US treasuries, so yes the money has been “used” elsewhere, but there is an IOU in the from of full faith and credit bonds). So they’re transferring some money from the retirement fund, and changing the percentage of your OASDI fee that goes to disability. The retirement fund doesnt draw down the trust fund until about 2034. Then the cash flows will require more taxes or less transfer payments. They are making some changes to attempt to weed out the abusive aspects of the disability program. We’ll see.
I’m glad file and suspend is going away. I don’t blame anyone who is using it, but it’s so obviously a loophole that was only available to people who (1) could afford to delay the benefits of the higher-earning spouse and (2) knew about this trick. There’s just no argument to support it.
Not really. The couples who pay the maximum tax every year are couples where both are high earners. This loophole benefits couples where one is a high earner and the other not.
Anyone born in 1953 or earlier, however, will still be able to use restricted application, which permits an applicant to claim the spousal benefit at full retirement age, let his or her own benefit increase until age 70, and then switch over. It’s not a juicy a deal as file & suspend, but it still benefits some.