Before I get to today’s question, I must give some background information on the topic at hand — and that is the so-called maximizing strategy that many people mistakenly call “file and suspend.” What they usually mean is the strategy called “file and restrict.” And it’s not just a matter of semantics. I will explain.
A Social Security law passed in the 1990s that allowed working seniors to claim full benefits at age 66 (the prior age was 72) included some totally unintended provisions that let seniors play around with, or maximize, their benefits. One of those provisions came to be called “file and suspend.” This strategy was usually employed by a husband who wanted to wait until age 70 to claim benefits and get a 32 percent delayed retirement credit added to his Social Security check. But he could file for benefits at 66 and immediately suspend his own benefits, while allowing his wife to take spousal benefits on his record when she came of age. This strategy was actually eliminated a couple years ago. But the term “file and suspend” lives on — mostly on the internet.
People still ask me if they can “file and suspend.” Again, they can’t. But what they can do is employ a somewhat related strategy called “file and restrict.” That tactic allows one member of a married couple to claim dependent husband’s or wife’s benefits on the other spouse’s record at age 66 while letting his or her own retirement benefits grow — usually until age 70. File and restrict is also pegged for elimination. But it’s still good for another couple years. Anyone turning 66 before January 2, 2020 can employ that strategy.
And let me point out why those strategies are indeed loopholes in the law that needed to be closed. A basic tenet of the Social Security program is that benefits are only paid to a spouse if that husband or wife was financially dependent on the primary-earning spouse. After all, in the Social Security scheme of things, spousal benefits fall under the broad category of “dependent” benefits.
With the loopholes in place, spousal benefits were being paid to husbands and wives who had their own jobs and who had their own pensions and Social Security benefits. They simply did not meet the definition of a “dependent” according to the law. Yet millions of such nondependent seniors were able to jump through the loophole and claim spousal benefits. Eliminating those loopholes is taking the Social Security system back to where it belongs.
So with that background, let’s get to today’s question. And in a twist to the normal scenario, we are hearing from a woman who filed and suspended to allow her husband to claim spousal benefits on her record.
Q: Before they changed the law, I filed and suspended when I turned 66 in March 2016. Then my husband filed for spousal benefits on my record. He turned 70 last month and filed for his own retirement benefits. While we were in the Social Security office, the clerk said that I could now file for spousal benefits on my husband’s record. So I did that.
But then I got a phone call from another Social Security rep who told me that I could not file for spousal benefits! So who is right — the local clerk or the representative on the phone?
A: The person on the phone is right. You can NOT file for spousal benefits because you have already technically filed for your own retirement benefits — even though you suspended them.
In case some of my readers are still confused, let me explain what you and your husband are doing. You wanted to delay starting your own retirement benefits until you turn 70 in order to get the 32 percent delayed retirement bonus added to your monthly benefits. But because you turned 66 before they changed the rules, you were able to use the “file and suspend” loophole. So you filed for your retirement benefits, and then immediately suspended them in order to let your husband use the file and restrict loophole.
In other words, he claimed spousal benefits on your record while he delays his own retirement benefits until age 70. That means he is currently getting an amount equal to 50 percent of your full retirement rate, with plans to switch to 132 percent of his retirement benefit at age 70.
He is now about to turn 70 and make that switch. And an obviously inexperienced clerk in your local Social Security office suggested that you turn around and file for spousal benefits on your husband’s retirement record. Or to put that in Social Security maximizing lingo, he thought you could now file and restrict. But you can’t file and restrict because you have already filed and suspended.
So I suggest you not look a gift horse in the mouth and instead be thankful that you and your husband were born at just the right time to allow you to milk the Social Security system out of all these unintended benefits.
And for those other seniors out there reading this column who either signed up for Social Security benefits before those maximizing loopholes became all the rage, or who will reach Social Security eligibility age after all the loopholes are closed, I hope you don’t think you are being cheated out of anything.
