One of the most creative ways to maximize a couple’s Social Security benefits is ending on May 1st. If you are among the few who have the opportunity to use this quirk in the law, known as “file-and-suspend” to gain extra spousal benefits, you might want to take advantage of it while you still have the opportunity.

File-and-Suspend

Here’s how the strategy currently works to help some couples maximize total Social Security benefits. The older (and presumably higher paid) member of the couple files for Social Security benefits at his/her full retirement age (FRA). Then he or she immediately suspends receipt of those benefits, delaying receipt of benefits until age 70, at which time he/she will receive a larger check.

Under current law as soon as the first spouse (worker) files for benefits, the other spouse can file for benefits under the worker’s account, receiving a “spousal benefit” – typically half the benefit of the person who filed and suspended. (For purposes of this explanation, let’s assume the spouse is a woman, but it could be either.)

The younger spouse receiving benefits is deemed to have filed on her own account, even though she is claiming “spousal benefits.” Therefore, she should wait and until she reaches FRA to avoid having her future check on her own work record permanently reduced.

But this “file-and-suspend” goes away May 1st. Actually, the critical date is April 29, 2016 – the last date on which a person of full retirement age can file and suspend benefits, and still allow a spouse to claim benefits on their record during suspension. Starting May 1, 2016 a worker can still file and suspend benefits — but a spouse can no longer collect a spousal benefit during the suspension.

Note: There is an exception for those who reach age 62 before the end of 2015. They can still use this technique when they reach FRA — but only if the working spouse who is now at FRA immediately files and suspends before April 29th, thus preserving this option of claiming spousal benefits when she reaches full retirement age.

After that date, a spouse of at least age 62 can still collect a “spousal benefit” — but only if her or his spouse is actually receiving his or her benefit. And, if the younger spouse has a work record of her own, she would be deemed to have filed for her own retirement benefit first – with any additional spousal benefit added to the check. Thus, by using this technique before reaching FRA, she has substantially impacted her future benefits on her own work record, permanently reducing her monthly check.

What to Do?

If you fit into the category of a two earner couple hoping to pick up four years of extra spousal benefits for a younger spouse during the years she is age 66 to70, while deferring the worker’s benefits until age 70, you need to act immediately to initiate the process.

Contact your nearest Social Security office to officially file for benefits and then immediately suspend them. That allows your spouse to claim spousal benefits for four years, accumulating a significant extra payout during that time — without impacting her own future benefits (as long as she waits until FRA to claim the spousal benefit).

Special Note: Divorced ex-spouses who were married for at last 10 years and have not remarried can claim spousal benefits as long as both ex-spouses are at least age 62 — even if the ex-spouse on whose work record the claim is being made has not yet filed to receive benefits, and even if that spouse has remarried.

Yes, it’s complicated! According to Tiffany Rovaina, wealth advisor at Bronfman E.L. Rothschild, who helped me decipher this issue, it’s important for people to get competent advice about their personal situation before making a decision that could impact the rest of their lives. And that’s The Savage Truth.

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