Executive Summary
Last fall, the Bipartisan Budget Act of 2015 changed the rules to eliminate two popular Social Security claiming strategies for married couples: File-and-Suspend, and Restricted Application.
Fortunately, the new rules didn’t take effect immediately, but the first transition – the elimination of File-and-Suspend – will apply for anyone who first requests for a voluntary suspension of benefits on April 30 or later. As a result, anyone who wants to be “grandfathered” under the old (current, and more favorable) rules has less than two weeks to complete their Social Security application and suspension request by the April 29 deadline!
As a result, anyone who has at least met the full retirement age of 66, and is not yet age 70, should be considering whether to submit a file-and-suspend request by April 29. Notably, the tactic is a moot point for anyone who has already claimed benefits, or who doesn’t plan to delay benefits going forward. Nor is file-and-suspend relevant for widows (who don’t need file-and-suspend to coordinate between retirement and survivor benefits), nor for divorcees (who rely on the Restricted Application strategy instead, which remains available after April 29 for anyone who was born in 1953 or prior).
Nonetheless, for married couples (and some parents with children) who are in the age 66-70 window and have not yet claimed their benefits, but where one person could activate a spousal or dependent child benefit for someone else while delaying their own benefit, only a small time window remains to submit a File-and-Suspend request before the rules are changed forever! And arguably, anyone who is single and doesn’t care about spousal benefits, but simply wants to preserve the right to “undo” and reinstate their delay decision in the next few years, may want to consider submitting a request to File-and-Suspend by April 29 as well!
Understanding The Soon-To-End File-And-Suspend Rules
In order for a spouse to be entitled to Social Security spousal benefits, the primary worker – upon whose earnings that spousal benefit will be calculated – must himself/herself have filed for benefits as well. In the ‘traditional’ family unit, this meant that the wife couldn’t get access to her spousal benefit until her husband actually filed for his own. When he got his retirement benefits, she became entitled to spousal benefits based on his record (which she could then claim if she was eligible based on her own age).
This ‘unification’ of retirement and spousal benefits – where couples cannot get either until the primary worker files for benefits – was the case for most of Social Security’s history… up until the Senior Citizens Freedom To Work Act in 2000. This legislation introduced, for the first time, the concept of “voluntary suspension”, where someone could file for benefits, and then later choose to suspend them (after reaching full retirement age) in order to accrue delayed retirement credits from suspension until the maximum age 70.
While the original vision of voluntary suspension was for a worker who had started benefits early (e.g., at age 62) to change their mind later and stop benefits in order to go back to work (thus the “Freedom To Work” Act), in the years after the rule was enacted, commentators observed that voluntary suspension could happen immediately after someone filed, too. Of course, doing so would simply mean the worker would never get a single benefit check, but the advantage was that by filing, a spouse could become entitled to spousal benefits, while by immediately suspending, the original worker could still earn the maximum delayed retirement credits as well. It was a form of “have your cake, and eat it, too”.
However, Congress viewed this File-And-Suspend Social Security tactic as an unintended consequence and a “loophole” of the voluntary suspension rule, given that in the system’s original framework, which had existed for decades, entitlement to spousal benefits was always supposed to coincide with the workers’ own retirement benefit (not be a scenario where you can get one while delaying the other).
Accordingly, in the fall of 2015, Congress enacted as a part of the Bipartisan Budget Act of 2015 a new rule to effectively “kill” the File-And-Suspend strategy, by stating that effective April 30 of 2016, a worker’s decision to suspend retirement benefits will suspend all benefits based on that individual’s earnings history, including spousal (and dependent) benefits. While voluntary suspension remains, this change renders the File-And-Suspend tactic totally useless, as now suspending really will be the equivalent of just having not filed at all.
Notably, though, the new voluntary suspension rules under the Bipartisan Budget Act of 2015 apply only for those who try to (file-and-)suspend on or after April 30 of 2016. Which means there’s under two weeks remaining for anyone who wants to take advantage of the “old” rules to act, now, before it’s gone forever.
Who Should Consider File-And-Suspend By The Deadline?
First and foremost, it’s crucial to recognize that file-and-suspend (or voluntary suspension in general) is only available for those who are full retirement age (currently age 66). Which means if the retiree isn’t already 66 (and/or won’t be turning 66 by April 29), then file-and-suspend is off the table anyway. Last year’s rule change took the option away before it was ever a chance.
Similarly, because the decision to file and suspend benefits is all about earning delayed retirement credits until age 70, it’s a moot point for anyone who is already age 70 or older (and would have started benefits already). In other words, the consideration of whether to engage in file-and-suspend by the deadline is only possibly relevant for those who are precisely between the ages of 66 and 70. (Notably, since Social Security allows a request for benefits to be filed up to 3 months ahead of when they will begin, there is some debate about whether an individual who turns 66 by July 29 could file and suspend by April 29th and be eligible under the “old” rules, since the filing happened in time, even though full retirement age hasn’t yet been reached. Given that the Social Security Administration has provided no guidance on this issue, it remains unclear what the outcome will be for anyone who tries this tactic by the deadline.)
In addition, the reality is that considering whether to file-and-suspend is only relevant for those who actually plan to delay benefits (and haven’t started already!), as otherwise the strategy is not to File-and-Suspend, but simply to File-and-Get benefits (which also makes the spouse entitled to any available spousal benefits, too), or to file a Restricted Application to claim their own spousal benefit (if the spouse already filed, themselves).
Nonetheless, for those who are between ages 66 and 70, have not started benefits, and plan to delay (and not claim a spousal benefit via a Restricted Application along the way), the opportunity to file and suspend before the April 29 should be considered, as there are several planning scenarios where it remains appealing.
Navigating The File-And-Suspend Deadline For Couples (And Parents)
To the extent that file-and-suspend is primarily about making a spouse (or dependent child) entitled to Social Security’s spousal or dependent benefits, married couples (and/or parents of minor children) have the most to gain by engaging in the file-and-suspend strategy before the deadline.
To actually be beneficial, though, at least one spouse needs to actually be in the age-66-to-age-70 window (where he/she could file and suspend in the first place), and the other spouse (who would claim the spousal benefit) needs to have a reason to claim a spousal benefit in the first place.
For instance, if the spouse had already claimed his/her own retirement benefits, that are higher than the spousal benefit, no spousal benefit will be paid either way, so there is no reason for a file-and-suspend (except to potentially preserve an individual reinstatement, as discussed in the next section). More generally, for file-and-suspend to be useful, the spouse needs to either not be eligible for his/her own retirement benefit, the retirement benefit needs to be smaller than the spousal benefit (such that accessing a spousal benefit would at least be a step up in benefits), or the spouse who has not-yet-filed needs to utilize the restricted application tactic themselves (filing for his/her spousal benefits at full retirement age, and switching to individual retirement benefits later).
Notably, the latter tactic is also irrelevant if the spouse is more than 4 years older, as by then he/she would have filed for individual retirement benefits anyway (making the opportunity for a restricted application a moot point). Similarly, if the spouse is more than 8 years younger, then file and suspend is also irrelevant to maximize a couple’s benefit, because by the time the spouse is eligible for a spousal benefit, the primary worker would have just filed for benefits already (even if delayed to age 70).
Beyond spousal benefits, file-and-suspend also remains relevant for a parent at full retirement age who has minor (or disabled) children in the household, and may be eligible for a dependent benefit as well as (or instead of) a spousal benefit. Once the (youngest) child reaches age 18, though, a dependent child’s benefit is no longer relevant (unless the child is permanently disabled).
In all these cases, though, it’s important to recognize that file-and-suspend is only appealing for a couple who otherwise wants to delay the primary worker’s Social Security benefit to age 70 in the first place, either to maximize his/her own benefit, or the survivor’s benefit. In a scenario where both spouses are unhealthy and are not likely to reach normal life expectancy, the optimal scenario is typically for both spouses to claim their own benefits as early as possible (which means the primary worker doesn’t file-and-suspend, he/she just files-and-gets benefits instead!).
File-And-Suspend For Individuals To Preserve Retroactive Reinstatement
While file-and-suspend is primarily about maximizing benefits for a couple, another indirect benefit of file-and-suspend is the opportunity for someone to change their mind after delaying and reinstatement benefits retroactively back to full retirement age.
The key to this strategy is that under the “normal” rules for Social Security, a request for retroactive benefits can only go backwards for up to 6 months’ worth of benefits. However, for someone who has previously filed-and-suspended, a request to reinstate benefits can go all the way back to the original date of suspension.
Thus, for instance, someone who was delayed Social Security benefits and then, at age 68, got news of an unfavorable health condition that would significantly curtail life expectancy (such that it was no longer beneficial to have delayed), a request for retroactive benefits could only claim the prior 6 months, but someone who had filed-and-suspended at full retirement age could request 24 months (2 years) of benefits in this case, going all the way back to that original age 66 suspension date.
As a result, individuals who don’t even have a spouse or dependent children may still wish to consider engaging in file-and-suspend before the April 29 deadline, just to preserve this option. Notably, though, doing so is only relevant if the person plans to delay benefits in the first place, and is between the ages of 66 and 70 (as age 66 is required to be eligible for file and suspend in the first place, and someone who is already beyond age 70 will have already filed for benefits anyway).
For those in the age window, though, this strategy remains relevant whether as an individual, or as a married couple where file-and-suspend is irrelevant. However, those considering the strategy should be aware of two caveats: 1) for a couple, engaging in file-and-suspend will also make that person ineligible to do their own restricted application for the other spouse’s benefit (which may actually be more appealing instead); and 2) for an individual or couple, the act of filing (to file-and-suspend) will enroll that person in Medicare Part A, which renders him/her ineligible to make any future contributions to a Health Savings Account (in the case that he/she was a participant in a high-deductible health plan and was otherwise eligible to begin with).
To take advantage of the tactic, though, it’s necessary to file and suspend by the April 29, 2016 deadline. For any file-and-suspend that occurs on April 30, 2016 or later, the subsequent opportunity for retroactive reinstatement is eliminated, under the new rules of the Bipartisan Budget Act of 2015. In other words, to preserve the ability to retroactively reinstate after the deadline, it’s necessary for the file-and-suspend to have occurred before the deadline.
File-And-Suspend Still Irrelevant For Those Who Are Divorced and/or Widowed
Because file-and-suspend is primarily about activating spousal benefits (or in certain cases, preserving the ability for a retroactive reinstatement of benefits), the strategy is generally irrelevant for those who are divorced or widowed.
Instead, the planning opportunity for widows is simply to coordinate the timing of individual retirement benefits and survivor benefits, which can already be done independently of one another. In general, the optimal strategy will simply be to claim the lower benefit as early as possible, and delay the larger benefit as late as possible (unless in poor health, and then the widow should simply claim any/every benefit as soon as they are eligible and won’t face a reduction due to the Earnings Test).
For divorcees, file-and-suspend also remains irrelevant, though restricted application is relevant, for those who want to claim an ex-spouse’s spousal benefit at full retirement age, and switch to their own benefit later. However, in the case of a restricted application, the changes under the Bipartisan Budget Act of 2015 are different; restricted application is automatically grandfathered for those born in 1953 or earlier (or on January 1st of 1954). As a result, anyone who is eligible based on their birth date will remain eligible going forward; the April 29 deadline is irrelevant.
Completing The File-And-Suspend Process Online By The April 29 Deadline
Notably, for those who do want to file-and-suspend by the April 29 deadline, there’s also the non-trivial matter of just executing the actual file-and-suspend claim in time. For many, this has proven to be more difficult than expected, due to widespread reports that local Social Security Administration offices are confused, and staff are undertrained, about how to process the requests. In some cases, those who are eligible for file-and-suspend being outright (and incorrectly) told they’re ineligible, despite a recent Social Security ‘emergency release’ trying to clarify the situation.
In addition, a potential glut of Social Security claiming requests, with the April 29 deadline looming, may also make it difficult for many retirees to even get a meeting in their local Social Security office in time.
Fortunately, though, it is possible to complete the file-and-suspend process using Social Security’s online system, which some are suggesting is the best course of action at this point, both to avoid the hassle of trying to schedule a local meeting, and the risk that the local Social Security Administration employee will be undertrained and unable to properly process the request in a timely manner.
To begin the process of filing online, go to the Social Security Administration’s “Retire Online” portal to submit the Social Security claim. The SSA even provides a 2-page visual guide on how to complete the application.
Unfortunately, though, while the application process to request to start of Social Security benefits is straightforward (and there is a box to check for those who want to file a restricted application for just spousal benefits), there is nothing in the online application process to indicate how to request the benefits be suspended (the key second part of a “file-and-suspend” strategy!). In order to make the request, Mary Beth Franklin advises to add a comment in the “Remarks” section towards the end of the online application, stating “I want to suspend my benefits”, and when the Social Security Administration’s main office processes the application, they will follow up by telephone to confirm the (immediate) voluntary suspension of benefits that completes the file-and-suspend process.
Alternatively, some advisory firms have partnered with third-party services that help to facilitate the online filing process, such as the $100 "Virtual Filing Service" provided by Social Security Advisors (which might be paid by the client, or offered as an add-on service by the financial advisor themselves!). In addition, those having trouble scheduling an appointment in time for the filing deadline can instead file a Form 795 - a Protective Filing Statement - to indicate their intention and (unsuccessful) attempt get an appointment in order to file-and-suspend by the April 29 deadline.
So what do you think? Are you doing any "last minute" File-and-Suspend applications for clients before the April 29 deadline? What planning and claiming scenarios have come up with your clients?
Michael–if an individual, age 67 and currently drawing on his own account, wishes to voluntarily suspend his benefits, can he do so before April 29 AND his wife can continue to draw her spousal benefit? If he suspends after April 29, will her spousal benefit cease? Thanks!
Yes to both.
Oscar,
Yes on both points. Suspending AFTER April 29 will suspend not only the individual’s own benefits, but his wife’s spousal benefits based on his record. If he suspends by April 29, he can complete the suspension for his own benefits and earn his delayed retirement credits WITHOUT impacting his wife’s benefits.
– MIchael
The wife is grandfathered in. The whole idea of file and suspend to is to trigger the deeming benefit. Since the the individual is already collecting that aspect of triggering spousal benefits is already taken care of. So if the 67 year old decides to voluntary suspect at any time before 70 he can do so without affecting the wife’s spousal benefits.
What if a spouse is collecting Social security Disability, but is not yet 66>
If you are single but not 66 by April 29 but will be 66 before July 31, is there any benefit to filing and suspending?
From the way I read the article, it appears not at this time but it could change.
Thanks.
Short answer. No.
The whole rubric of “file and suspend” is premised upon the notion that by delaying benefits and filing later, you will outlive the break-even point in order to realize a “superior return”. This is an eventuality that has odds of 1/2, based upon indisputable statistics of life expectancy. Moreover, since Michael’s primary thrust here is economics, there is another overriding financial consideration – modeling SS benefits as a single-payment annuity and measuring the return on investment by IRR (internal rate of return), demonstrates that the most profitable tactic is to file for benefits at FRA. I have done extensive simulations on this topic using the SSA tool “AnyPIA,” freely available from the SSA web site. All delayed filing strategies never achieve a superior IRR. Articulating this in the colloquial: “a dollar today is worth $2 tomorrow..” Or,, to put it in more personal terms and as those of us who are aging can attest, those delayed, enhanced benefits may help purchase a better walker at age 85, but they won’t help you dance the tango… Interesting article, as usual Michael..
David–thank you for this comment. I am wrestling as to whether to voluntarily suspend my benefits prior to 4/29 so that my wife’s spousal benefit will be preserved. Your posting was beneficial in my decision-making process.
Do it. You lose nothing and guarantee that your can take advantage of her spousal benefits [assuming she was over 62 at the end of last year] when she hits FRA.
Hi David, could you explain the analysis you’ve done and how it indicates that delaying your benefit never results in a superior IRR result. I understand your qualitative point – that’s it’s better to have the money while you’re younger and can enjoy it – but help me understand the math behind your quantitative point.
OK – in the interest of brevity I’ll hopefully provide a useful, abbreviated reply. I used the “AnyPIA” program available from SSA. This is a very sophisticated SS analysis program originally used by the district SS offices to compute all manner of SS benefits scenarios. If you wish to obtain it, it’s available from the SSA at their web site. “User-friendly” it is not – assuming you have considerable expertise about SS and its nomenclature; however, keep at it – the more you use it, the more you will be impressed with the depth of capabilities. As a simplifying precept, I modeled multiple SS benefit scenarios, each defined as a single-payment annuity that (by definition..) involved a single annuity premium payment during the year of retirement, followed by a stream of monthly benefit payments starting at the month of first SS benefit payment and terminating at age 90. The simplifying assumption here is that a single payment is equivalent to a working lifetime of regular pay check deductions; however, since this assumption is uniformly applied to all scenarios, it is completely appropriate for relative assessment purposes. The amount of the single premium was obtained from a client’s SSA annual Benefit statement, which includes the total SS contribution amount, years of eligible employment, SS-eligible income, etc. – basically all the data needed to model a hypothetical “working life” within AnyPIA. Then, the fun begins. By changing the date of retirement (before FRA, at FRA, after…) at approx. three month intervals between age 62 and 70, you derive a benefit stream for each scenario. Then, load these into Excel and use the built-in macros to calculate the IRR on a month-by-month basis, from the starting month of retirement to age 90. One can then assess all the metrics I originally discussed. Principally, which strategy yields the highest IRR. The data clearly show that filing at FRA yields the highest absolute IRR and although the delayed filing scenarios will asymptote to roughly the same value, they don’t catch up by age 90. I should also mention that I’ve modeled Primary/Spousal filing scenarios which also demonstrate the same behavior – mutual filing at FRA is the best bet. Sorry Michael, for the long-winded response.
If you are already collecting SSI and will be 68 in Nov. and are single is there any way to boost my monthly check? Is there any way to calculate how they derived the monthly payment. I was told it would be 60% if my ending salary but it is not. It also seems as if I’m being double taxed. Once on the earning and now again upon withdrawal from the IRA????? This doesn’t seem fair so I’m all open to any loop holes. Thanks
Has anyone heard of a cohabitating person allowed to benefit from file and suspend? I was talking to a lady who was told by an advisor that she was eligible even though they are not married. They have cohabitated for the past 40 years. She will be turning 65 in July and her significant other is 66 already and hasn’t filed yet.
Not too long ago I ran into this issue as well and did some research along with a friend who is a family law expert.
Here’s what we found:
Generally, the Social Security Administration will recognize a common-law marriage as valid if the following requirements are met.
First, the common law marriage must be contracted in a state where common-law marriages are recognized. Less than half of the fifty states even recognize common-law marriage. In states that do recognize common-law marriage, usually the parties must live together and hold themselves out to the public as husband and wife. The cohabitation does not have to be in the State where the marriage agreement was made.
Second, there must be an agreement to marry. This agreement must:
-Propose a permanent union that is exclusive;
-Be in the present tense;
-Propose a marital status that cannot be terminated at will but can be terminated only in the same manner as a “traditional” marriage, i.e., death, divorce or annulment.
Third, the marriage must be entered into by mutual consent of the couple to become husband and wife from that time forward.
Finally, both individuals must be legally capable of entering into a valid marriage such as having the mental capacity to marry or not otherwise be legally married to someone else at the time of entering into the common-law marriage.”
She went on to tell me that many have assumed they were in a common-law marriage, but often find out otherwise when the relationship ends or a death occurs.
Hope that helps!
I suppose I am a little confused as to why someone who is not 66 by April 29th, but will be by August would not go ahead and file-and-suspend right now. What is the worst thing that could happen. Don’t you still have 12 months to withdraw your application. Just undo it. You haven’t received any benefits, so there shouldn’t be any repayment issues. Then hopefully the questions can be worked out within the next 12 months. What am I missing here?
Because you can’t suspend until you’re full retirement age. If you’re not yet 66 and you file now, you’re just FILING. There will be no suspend. (Or at least, the suspend will happen after April 30th and be subject to the new less-favorable rules.)
The grandfathering is the date you request the suspension, not the date you request the original filing, And you can’t suspend until you’re full retirement age.
– Michael
I’m 66 y/o turning 67 in May and started receiving SS benefits at age 62. I’m divorced and single claiming spousal benefits from deceased husband whose benefit was greater than my own. Is restricted application relevant?
I am 68, and my wife is 63. We both work, earn about the same, and have not filed for any SS benefits. My plan is to wait for my benefits at age 70. Then when my wife turns 66, she can begin receiving spousal benefits and continue to build her SS benefits. For her, is that file and suspend or restricted application? Is that my best plan or even possible? Thanks.
Just to double check….my spouse and I are 62. Does this mean we cannot file/suspend on the April 29 deadline? Because we are too young??
Thank you !
Correct. But if you were born in 1953 or earlier, then Restricted Application will still be available to you several years from now, when you reach full retirement age.
Whether either is actually relevant for you or not would depend on your circumstances, though.
– Michael
Thank you for the reply! Do I file the restricted app now or later?? What does that do?
When you’re full retirement age, you decide then if you want to do a Restricted Application. These rules are completely irrelevant for you at age 62.
However, deciding whether one/either/both of you should start at 62 or delay IS relevant now. But it has nothing to do with File-and-Suspend or Restricted Application. Coordinating Social Security claiming strategies entails far more than ‘just’ these two esoteric and not-often-used rules.
– Michael
Thank you again! Do,you have any recommendations as to where I could learn more for our current situation?
I forgot to ask. Is there anything we can do to help us going forward??
Thank you!
Wife is 69 and had already filed & suspended a couple years ago. Husband turned 66 in Nov 2015. Husband wants to wait until age 70 to collect his benefits, but also to file a restricted application now to collect on spouse’s benefits while waiting for age 70.
Does husband ‘file & suspend’ (in order to collect ‘back pay’ if comes down with life-threatening disease before age 70) & simultaneously file a restricted application to collect on wife’s benefits? Or only do a restricted application? If so, what happens if he gets sick & will die soon?
Does wife have to actually start collecting her benefits now, (before husband’s restricted application kicks in), in order to allow husband to collect on hers, or does her ‘file & suspend’ status allow for that?
I’m 68 and am planning to file and suspend today. I plan to delay benefits until 70. My wife turns 66 next year and has not filed. My question: what “start” date should I give for my benefits? (The benefits that are being suspended anyway.) My feeling is that Oct 2015 (the earliest date) is the best because it gives the flexibility to ask for retroactive benefits to that date if my medical situation changes in a big way. Otherwise, the numbers are the same. Am I correct?
I am turning 66 next month and will have reached my FRA. I am currently receiving Survivor Benefits, ($924.80/mo), from my wife who passed away two years ago. Can I still file and suspend my benefits, which are a larger amount, ($2,100.00/mo), until age 70 without effecting my Survivor Benefits?
I began filing online for Medicare and Social Security prior to the 29 APR 2016 deadline but did not complete the application. The confirmation I received said as long as I complete the application by some time this month (I forgot the actual date but have the notice somewhere) the filing date would be considered on the date I started the online application-again prior to 29 APR 2016. Am I still eligible to file and suspend? If so, I am 67 as is my wife. She began collecting her own social security benefits at age 62. Her benefits are much less than mine. Would file and suspend apply to our situation, i.e. could I suspend my benefits and have he benefits based on me?
Is this still applicable for 2021?