Social Security is a key source of income for older Americans, and people have historically done whatever they could in order to get the most from the program. Whether it's making the smartest personal decision on timing when you claim benefits or understanding what you can do during your career to boost the amount of benefits you'll be entitled to claim, there are a host of things you can do to put yourself in the best possible position to retire comfortably.
Yet some strategies for maximizing Social Security benefits have become controversial. In late 2015, lawmakers took steps to take away a couple of specific Social Security strategies. One of them is now history for anyone who didn't take immediate action two years ago, but there are still some people who can take advantage of the remaining opportunity while it lasts.
What benefits got taken away
Nearly three years ago, Congress and President Obama made a deal following a long battle over the federal budget. Under its terms, lawmakers and the White House agreed to eliminate two provisions that the laws governing Social Security allowed people to use. Many policymakers who supported their elimination described these provisions as loopholes, inflating what some couples were allowed to receive in what they saw as an unfair way.
The provision that got the most attention was known as "file and suspend." This strategy allowed a worker to file for benefits at full retirement age and then immediately suspend them. This move enabled spousal and children's benefits to get paid under that worker's earnings history while still enabling the worker to delay actually receiving regular retirement benefits. The worker could even earn delayed retirement credits and eventually get a larger payout. Under the changed rule, no one was allowed to file and suspend after April 2016.
The other strategy involved a similar move but from a slightly different perspective. Under the strategy known as "file as a spouse first" or FAASF for short, those who had reached full retirement age had the right to limit their claim of Social Security to cover only their spousal benefits. That let them collect a modest benefit from Social Security now, while letting their own retirement benefit grow further over time. Again, the retirement benefits would increase thanks to delayed retirement credits, which could boost their size by as much as 32%.
To understand how this might help someone, consider a simple example. If you had earned retirement benefits of $1,000 per month at full retirement age but your spouse had greater earnings to produce $2,000 in monthly benefits, then your spousal benefit would also be $1,000 per month. If you don't qualify for the FAASF strategy or choose not to use it, then you'll have to claim the spousal and retirement benefits at the same time. You can only take the greater of the two, not the total, and so you'd only get $1,000 per month.
However, if you qualify for FAASF, you can claim just your spousal benefit when you turn 66. You'll get the same $1,000 per month. But your own retirement benefit can earn delayed retirement credits. When you reach 70, you can claim those benefits and get $1,320 per month instead of $1,000. In other words, by filing as a spouse first, you can get an extra $320 per month for life after you turn 70.
Why some people in their mid-60s can still use FAASF
In a somewhat unusual move, the bill that eliminated these provisions gave generous grandfathering conditions for the FAASF strategy. Under its terms, anyone who turned 62 before Jan. 1, 2016, was allowed to file as a spouse first while not having been deemed to have claimed their own retirement benefits at the same time.
The confusing thing about this grandfathering provision is that 62-year-olds aren't actually allowed to use the FAASF strategy. You have to reach full retirement age before filing as a spouse first actually works, and for those covered under the grandfathering provision, full retirement age was 66. Therefore, some 62- and 63-year-olds haven't yet been able to take advantage of the rule, and the youngest in that group will have to wait until late 2019 before they can file as a spouse first and reap the benefits of the strategy.
Be smart about FAASF
If you're turning 66 this year or next, and haven't yet filed for Social Security benefits, keep filing as a spouse first in mind. It won't produce additional monthly benefits for everyone, but if it works for you, it can mean hundreds of dollars extra in your pocket every month for the rest of your life.