A Social Security benefit strategy for married couples, called “file and suspend,” is ending, unless used before April 29 of this year.
A second option, called “claim now; claim more later,” is also being phased out. The changes are not “grandfathered,” however, so claimants should consider these as soon as possible.
Social Security benefits are classically based on a wage earner’s history of compensation, using the highest 35 years of employment. The monthly benefit is based on the age of retirement factored into this average. A person who delays retirement until age 70 receives almost double the benefits of someone who files a claim early, at age 62. A chart showing the effect of delayed and early claims for retirement benefits can be found at www.centrelaw.com.
Under current rules, if one member of a married couple has significantly higher earnings than the other, it is possible for the lower-earning of the two to get spousal benefits, which are set at up to half the higher wage earner’s amount.
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So, if on a couple’s earnings record, one spouse had worked steadily in a profession and the other had interrupted his or her professional development to raise children, the spouse with higher earnings might qualify for $2,000/month benefits, while the other might be limited to $500, based on his or her earnings record. He or she may apply for spousal benefits and receive $1,000/month spousal benefits.
There are other situations where a claimant who has had little or no earnings may qualify for benefits based on someone else’s earning record. For example, people who became disabled while children can qualify for benefits based on their parents’ earnings records. However, an element of these other benefits is that the parent has died or is drawing benefits himself or herself.
What if the higher wage earner is still working and wants to continue until age 70 to qualify for the higher benefit? Under current rules, there’s a strategy called “file and suspend” where the higher wage earner of a married couple can file a retirement claim at age 66 and then suspend the benefit. He or she will not be drawing social security, and delayed retirement credits will continue to accrue. Under current rules, if the higher wage earner’s claim has been suspended, the lower wage earner can still file a claim for spousal benefits.
Beginning April 29, if a couple has not already used this strategy, the right to do so will be lost. Under the new rules, with some limited exceptions, spouses and dependents cannot claim benefits if the primary worker has suspended his or her benefit.
One exception allows divorced spouses (who have not remarried) to file claims on their former spouse’s earnings record. Even if the former spouse suspends, the divorced former spouse can still move forward with a claim for spousal benefits. This requires the couple to have been married at least 10 years before the divorce.
A second strategy, called “claim now; claim more later,” is also affected by the change. Under this strategy, if a spouse files only for spousal benefits, he or she may continue to work and obtain delayed retirement credits on his or her own earnings record. Then, at age 70, he can retire and obtain enhanced benefits due to a late retirement age. Under the changes effective April 29, a claim filed is deemed to be requesting both spousal and direct benefits, so as to prevent this strategy.
Social Security benefits are complicated, and there are various retirement strategies available. This article covers only the general situation discussed, and there are other factors which may apply. If you think the old rules might apply, it is important to take action while you still can. Seek qualified professional advice as soon as possible to beat the April 29 deadline.
Amos Goodall is a certified elder law attorney practicing in State College with Steinbacher, Stahl, Goodall & Yurchak. He is also a fellow of the American College of Trust and Estate Counsel.