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"File And Suspend" Is Gone, but This Social Security Strategy Still Works -- for Now

By Todd Campbell - Updated Mar 8, 2018 at 10:18AM

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The restricted filing Social Security loophole is still available to some Americans.

A stroke of a pen has eliminated the commonly used "file and suspend" Social Security strategy, but that doesn't mean that there aren't any Social Security boosting strategies left. For example, the restricted filing strategy can still be used if you turned 62 by January 1, or if you're a widower.

Closing "loopholes"
Social Security is a pay-as-you-go system wherein benefits are financed by payroll taxes collected on current workers.

However, payroll taxes have failed to cover Social Security's outlays since 2010, and that's forcing Social Security to tap its trust fund. Unfortunately, the Congressional Budget Office estimates that trust fund will run dry in 2029, forcing an across the board cut to benefits of roughly 30%.

Social Security benefits form

Image source: Getty Images.

In a bid to extend Social Security's solvency, Washington is eliminating what it believes to be loopholes that have allowed Social Security recipients to increase their lifetime income from the program. One of those loopholes is the "file and suspend" strategy.

As a refresher, here's how the file and suspend strategy works. First, an individual who reached full retirement age, or the age at which you can collect 100% of your monthly benefit, claimed Social Security so that their spouse could receive spousal benefits. Then, the primary filer suspended their own benefit so that it could grow until age 70 thanks to delayed retirement credits. Finally, the spouse files a restricted application so that she only receives her spousal benefit. Thus, her primary benefits also grew until age 70.

Therefore, the couple collected spousal benefits as income from full retirement age until age 70, at which point they both activated their larger delayed benefit. Because delayed retirement credits increase Social Security income by 8% per year, this strategy allowed couples to collect tens of thousands of additional dollars in lifetime benefits.

Sadly, the chance to take advantage of file and suspend ends on April 29.

Restricting Social Security
The restricted application Social Security strategy is also on the chopping block, but it remains available to married couples and divorced spouses (who were married at least 10 years) who were born before 1954.

To benefit from this scheme, a person at their full retirement age elects to receive their spousal benefit, rather than their own benefit.

This allows the spouse (or ex-spouse) to collect up to 50% of their spouses Social Security income while their own benefit continues to grow until age 70. Once the spouse turns 70, she can switch over to her own larger benefit.

For example, let's say Jim and Mary are 66 years old and that's their full retirement age. Jim's benefit at full retirement age is $2,000 and Mary's is $1,000. If Jim claims Social Security, then Mary can opt to receive his spousal benefit of $1,000 and let her own benefit grow to $1,320 at age 70 (8% per year). Doing this will net them an additional $320 per month from age 70 on.

There are, however, a few rules to follow.

First, this strategy is only available if you already turned 62 before 2016. Second, it requires that your spouse is receiving their benefit (remember, spousal benefits will no longer be paid unless the primary beneficiary is also receiving their benefits).

If you were born in 1954 or later, this restricted filing strategy is no longer available. However, it is available to widows and widowers, regardless of when they were born. For example, if Jim passes away, Mary can receive her survivor benefit, rather than her own benefit, so that her own benefit can grow until age 70. At 70, she can switch from her survivor benefit to her now higher primary benefit.

Tying it together
There's no magic age at which to claim Social Security. It depends entirely on your particular situation. Yes, the restricted application strategy may boost lifetime Social Security income, so it should be considered, but if your financial situation won't allow for it, or your health is poor, it may not make the most sense.

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