For U.S. retirees in Dumaguete and elsewhere in the world, a major change to Social Security is coming. Social Security has not firmed up this date, but the best information available suggests that effective April 30, it will no longer be possible to file for benefits and immediately suspend those benefits – a strategy commonly referred to as file and suspend . The other planning technique being limited is the restricted application.
The filing and suspending strategy allows you to file for benefits, which then allows your spouse to claim benefits on your work record. Next, you suspend your benefits which allows your monthly income to grow until age 70, if you so desire. For example: let’s say you want to continue to work, but your spouse didn’t work long enough (10 years or 40 quarters) to qualify for his/her own benefit. You can file and suspend, which would allow you to continue to work, earn delayed retirement credits, and enable your spouse to take half of your full retirement age benefit (PIA). This can be a nifty strategy for those 66 or older that don’t need to collect all their Social Security.
The restricted application is often used in conjunction with the file and suspend strategy.
In short, for those individuals between ages 66 and 70, this strategy involves claiming your spousal benefit under your spouse’s work record. This allows your benefit to grow until age 70, while collecting on their spouse’s work record. At 70, you then switch to your own benefit. It usually makes sense for couples with similar benefits, as illustrated by the following example: Sam and Sally are married, Sam: age 67, SS Benefit (PIA): $1,500/m, Sally: age 66, and SS Benefit (PIA): $700/m. In this scenario, Sally could file a restricted application for spousal benefits and would receive $750/month (half of Sam’s PIA). This would allow her benefit to grow by 8% over the four years that she collects a spousal benefit. At 70, she would switch back to her benefits based on her own earning record. At that point, she would receive $924/month (8% growth every year for four years = $700 x 1.32). Here is the catch: Sam would have to file for benefits in order for Sally to take advantage of this strategy. If Sam, too, wants to let his benefit grow until age 70, he would need to file and suspend.
If you will be full retirement age of 66 or older by the end of April, you need to consider if you should file and suspend your benefit, because the deadline to use this strategy is April 29. For those individuals born on January 1, 1954 or earlier, they still qualify for the restricted application strategy.
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Author’s email: wolff2000@earthlink.net
