9143 / Is “file and suspend” a viable Social Security planning option?

The rules governing Social Security claiming have changed so that the file and suspend strategy is now generally unavailable for most individuals. Although the file and suspend strategy is generally now unavailable for most individuals, for older individuals (those who were at least 66 years of age by April 29, 2016) who have already filed and suspended, the strategy remains available. Under the new rules, individuals can still file and suspend, but the benefits received by others (a spouse or dependent) that are based on the individual’s earnings record are also suspended.

Divorced spouses, however, may continue to receive benefits even if one spouse chooses to suspend his or her benefits. A spouse of a client who filed and suspended before the deadline is entitled to collect his or her full retirement benefit if he or she was 62 years of age on January 1, 2016.

For individuals who were born in 1954 or thereafter, the option of choosing between two spouses’ benefits is no longer available—the individual will automatically receive the higher of the two benefits when he or she applies for Social Security (known as a “deemed filing” requirement). The individual will automatically be deemed to apply for both available benefits.

Surviving spouses (or divorced surviving spouses) are not subject to this rule, and are still permitted to apply for survivor benefits and subsequently switch to his or her own retirement benefits at a later date if the retirement benefit would produce a higher total benefit. Deemed filing also does not apply to an individual who is receiving a spouse’s benefit and is also entitled to disability benefits.

In the past, the file and suspend strategy allowed one spouse to begin collecting spousal benefits without jeopardizing the amount of the second spouse’s retirement benefit. The second spouse was permitted to file for his or her benefits and then make a subsequent filing to suspend those benefits.

During the time that the benefits were suspended, one spouse earned delayed retirement credits, which increased the eventual benefit level by 8 percent for each year in which benefits were suspended. The taxpayer was, however, required to begin collecting benefits by age 70, by which point the benefit level could be increased substantially.

A spouse who was still working was permitted to collect spousal benefits but could similarly suspend any work-related benefit, so that it too could continue to grow until the working spouse reached age 70. At that point, both spouses would be entitled to a larger benefit and would still have collected some Social Security income in the intervening years.