Saturday, October 31, 2015

New Budget Deal DOES cut Social Security (File and Suspend Rule)

The "File and Suspend" rule for Social Security ends in the new budget deal ... and that might be bad news for divorced women heading toward retirement.

Slate: People weren’t just using the "file and suspend" strategy out of greed. They were using it to boost what are often less than adequate income replacement levels in retirement. It came about as part of legislation designed to encourage people in their 60s to remain part of the paid workforce by eliminating caps on what seniors could earn and still claim Social Security. The "file and suspend" strategy allows one member of a married couple to file for his or her Social Security benefits on reaching the full retirement age but then suspend them. This allowed the lower-earning partner—usually the wife—to take her spousal benefits when she turned 66, while the other member of the marital team—usually the husband—continued to work. When the file-and-suspend spouse turned 70, he would once again claim his benefits, this time for good. At that point, the other partner forgoes Social Security’s spousal benefit in favor of her now-larger personal monthly stipend. 

TIME: The "file and suspend" strategy calls for the higher-earning spouse to file for Social Security benefits at his or her full retirement age, but then suspend that filing while the benefit grows, until as late as 70. The lower-earning spouse can then claim spousal benefits at his or her own full retirement age, and later shift to their own full benefit, if it is larger. (A spousal benefit is half of the primary earner’s benefit.) The Center for Retirement Research has estimated that file-and-suspend adds $9.5 billion in annual benefit costs to the program. The White House targeted it for elimination in the budget plan issued last year, calling it an “aggressive” move used by high-income households to “manipulate” benefits. The budget deal approved by the House this week would clamp down on the practice for anyone who turns age 62 after calendar year 2015. 

ANGRY BEAR: "File and suspend" allows someone to get Social Security benefits prior to retiring, while not having to accept the lower benefits one gets if one retires at 62 or 66. One can get the higher benefits later. This will now not be allowed, so one must accept the lower benefits if one starts getting benefits early. This has only been possible for married couples with this involving one getting spousal benefits and then their own through some semi-complicated maneuvers that have been allowed since 2001." [*The article says something about Paul Ryan too.]


  1. This is probably in response to that book "Get What's Yours" which talked at length about the "file and suspend" part of SS. Until that book came out, very few people knew about it.

    1. Thanks. It looks like it's free on Kindle at Amazon...