For many years now retirees have resorted to the clever tip known as “file and suspend” as a way to boost their Social Security benefits significantly. This legal loophole made it possible for married couples to optimize their retirement income, sometimes gaining tens of thousands of dollars. Is this “file and suspend” technique still encouraged nowadays? The simplest way to put it is that “file and suspend” strategy was officially shut down by Congress in 2016 and all attempts to use it are strongly discouraged.
The way the “File and Suspend” strategy worked
According to the “file and suspend” strategy, sometimes called “claim and suspend,” married couples could maximize their Social Security benefits. The way it worked was that one spouse would reach full retirement age (typically 66 at the time) and file for Social Security benefits. This triggered the eligibility for the other spouse to start collecting spousal benefits that were approximately 50% of the higher earner’s benefit amount.
The trick to achieving higher Social Security benefits was that after filing, the first spouse would voluntarily suspend their own benefits. By doing this, it encouraged their own retirement benefits to continue growing at a rate of up to 8% per year due to delayed retirement credits that surface at the age of 70. With the “file and suspend” method, the second spouse continued to collect spousal benefits. This meant that the couple got to enjoy their cake and eat it too while securing delayed credits and receiving spousal benefits.
Financial planners advocated this strategy as the technique did see couples reaping almost $60,000 in lifetime Social Security income in some cases. Critics argued, however, that this strategy benefited the wealthy only. It was for this reason that in 2015, Congress decided to put a stop to it.
The Budget Bill of 2015 closed this loophole
In the latter part of 2015, the Bipartisan Budget Act saw Congress passing two key changes that effectively ended the infamous “file and suspend” strategy:
- No benefits while suspended: If a person suspends their benefits, no one else (spouse or children) can collect benefits based on that individual’s earnings record during the suspension period.
- Deemed filing rule expanded: Previously, only people who claimed before full retirement age were automatically “deemed” to be filing for both their retirement and spousal benefits. After the law change, this rule applied to everyone so that meant that citizens eligible for both, could not choose just one. Citizens would get whichever benefit is higher.
While these decisions were made in 2015, the changes took effect for all new applicants after April 29, 2016. As of January 1, 2024, the grandfathered group (born before January 2, 1954) had aged past 70 and therefore were no longer filing new applications. 2024 also saw the window for the “file and suspend” strategy closed for all citizens.
Why to avoid the “file and suspend” strategy today
While citizens often ask whether the “file and suspend” method can be tried today, it is not allowed. Social Security Administration (SSA) has asserted that benefits on a person’s record will not be paid out while their benefits are suspended. This archaic strategy won’t work today and could result in further delays, confusion, or even denied claims.
No financial advice suggesting this technique should be followed even if the advice hints that citizens may still qualify. There is no ambiguity in the message that “file and suspend” is no longer available.
One such narrow exception to the newly deemed filing rule includes that of if you’re caring for a child under 16 or a child with a disability, or if you qualify for disability benefits yourself, you may still be able to file a restricted application for spousal benefits without claiming your own. Other than in this case, the rule of no “file and suspends” stands firm.
While the “file and suspend” strategy was once a golden ticket for many retirees, that time has long passed. Citizens can, however, still get up to 76% more Social Security benefits if they don’t claim until a certain age.
