New Rules for File and Suspend

So the heyday is over, file and suspend under the old rules is gone forever as of April 30, 2016. Those were the days, my friend. We thought they’d never end. We’d file and suspend forever and a day. But not any more…

Or, may we still file and suspend?

Of course we can still file and suspend, the rules are just more restrictive now. When you suspend your benefits these days, all benefits that are payable based upon your record are suspended as well. For example, if you have a child who is eligible for benefits based on your record, when you suspend your benefits the child’s benefits will be suspended as well.  The same goes for spousal benefits based on your record.

To be clear, the rules about suspending benefits are:

• You must be at least Full Retirement Age
• When you suspend benefits, your own benefit will not be paid to you
• Since you are not receiving benefits, you will earn delay credits at the rate of 8% for every year of delay
• ALL OTHER BENEFITS based on your record will also be suspended, including spousal benefits and child’s benefits

File and Suspend

Before the rules changed, it was common to file and suspend at the same time. Now, with the new rules, it would likely not make much sense to file and suspend at the same time.

The action of filing for benefits is enough to enable benefits for others (spouse or child) to receive benefits based on your record. Under the old rules, if you suspended your benefits, these auxiliary benefits could continue – so, file and suspend at the same time made a lot of sense. By doing so, you would enable others to receive the auxiliary benefits, while at the same time delaying your own actual filing to some later date, receiving the delay credits for the delay.

With today’s rules, file and suspend at the same time doesn’t actually accomplish anything for you, other than establish a filing date.

What you might do though, is file for benefits at one point, and then later suspend them. For example, if you are 62 years old and you have a child who is under 18 (for example’s sake we’ll say 12 years old), you could file for your own benefits and enable your child to receive benefits based on your record. When the child reaches age 18, he will no longer be eligible to receive the benefits – so you could suspend your benefits at this point (you’d be 68 by now) and receive an 8% increase to your benefits for each year that you delay.

The strategy above would be important to you to provide some benefits to the auxiliary dependents (such as a child or spouse) for a short period of time, while allowing you to then enhance your benefits later by suspending.

If the concept isn’t thrilling to you, you’re not alone. Suspending benefits just isn’t what it used to be.