I’m not much an expert on Social Security (I am not collecting it at the moment), but I was planning to use the widely-encouraged ‘file and suspend’ strategy when my wife reached age 66 in a few years.
Under that strategy, at full retirement age, the higher earner in a couple would file for Social Security benefits, then immediately suspend benefits. The other spouse could then claim the ‘spousal benefit’ – half of the filing spouse’s benefit. That would continue until both spouses reach age 70 and both collect the highest-possible benefit.
While I considered ‘file-and-suspend’ to be a questionable loophole, it was legal and a lot of savvy people were planning to use it to maximize Social Security benefits. There was even a recent book that used file-and-suspend as a core strategy: ‘Get What’s Yours: The Secrets to Maxing Out Your Social Security.‘
But in the new two-year budget deal just hammered out by Congress, this strategy will be gutted. This is from the story in the Wall Street Journal:
Congress is putting an end to two Social Security filing strategies that many couples have used to add tens of thousands of dollars to their retirement incomes. ….
The strategies under fire—known as file-and-suspend and a restricted application for spousal benefits—have made it possible for both members of a couple who are 66 or older to delay claiming benefits based on their own earnings records while one pockets a so-called spousal benefit based on the other’s earnings.
While the new law shuts down the two strategies, some people can still take advantage of them—provided they act fast. For those for whom the strategies will be off limits, meanwhile, claiming decisions may become less complicated but also less lucrative.
I’d advise reading more on this topic, because if you and your spouse are currently 66 (full retirement age) you may have a six-month window to use the strategy. Otherwise, it looks like the loophole is closing.
I am sure we will be hearing more about this in coming days.