Social Security is a key revenue source for older Americans, and people historically have done everything possible to make the most of the program. Whether you make the smartest personal decision about when you claim benefits or understand what you can do during your career to increase the amount of benefits you will be entitled to claim, there are a number of things you can do to get in the best possible position to retire comfortably.
However, some strategies to maximize the benefits of Social Security have become controversial. At the end of 2015, legislators took measures to eliminate a couple of specific Social Security strategies. One of them is now history for anyone who did not take immediate action two years ago, but there are still some people who can take advantage of the remaining opportunity while it lasts.
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What benefits were taken away
Almost three years ago, Congress and President Obama reached an agreement after a long battle over the federal budget. According to its terms, the legislators and the White House agreed to eliminate two provisions that the laws governing Social Security allowed people to use. Many legislators who supported its elimination described these provisions as gaps, inflating what some couples could receive in what they considered an unfair way.
The provision that received the most attention was known as "file and suspend". This strategy allowed a worker to apply for benefits at full retirement age and then suspend them immediately. This movement allowed benefits for the spouse and children to receive payments based on that worker's income history, while allowing the worker to delay the actual receipt of retirement benefits. The worker could even earn delayed retirement credits and finally get a higher payment. According to the modified rule, no one was allowed to file and suspend after April 2016.
The other strategy involved a similar movement but from a slightly different perspective. Under the strategy known as "file as spouse first" or FAASF for short, those who had reached full retirement age had the right to limit their Social Security claim to cover only their spousal benefits. That allows them to charge a modest Social Security benefit now, while allowing their own retirement benefit to grow over time. Once again, retirement benefits would increase thanks to deferred retirement credits, which could increase their size by up to 32%.
To understand how this might help someone, consider a simple example. If you had obtained retirement benefits of $ 1,000 per month at full retirement age, but your spouse had greater earnings to produce $ 2,000 in monthly benefits, then your spousal benefit would also be $ 1,000 per month. If you do not qualify for the FAASF strategy or choose not to use it, you must apply for spousal and retirement benefits at the same time. You can only take the higher of the two, not the total, so you will only get $ 1,000 per month.
However, if you qualify for FAASF, you can claim only your spousal benefit when you turn 66. I will get the same $ 1,000 per month. But your own retirement benefit can get deferred retirement credits. When you reach 70, you can claim those benefits and get $ 1,320 per month instead of $ 1,000. In other words, by filing as a spouse first, you can get an additional $ 320 for life after you turn 70.
Why some people around 60 years old can still use FAASF
to a somewhat unusual extent, the bill that eliminated these provisions resulted in generous conditions for the implementation of the FAASF strategy. Under their terms, anyone who turned 62 before January 1, 2016, was allowed to file as a spouse first, without having considered that they had claimed their own retirement benefits at the same time.
The confusing thing about this subscription clause is that at 62 years of age they are not allowed to use the FAASF strategy. You must reach full retirement age before submitting the application since the first spouse actually works, and for those covered by the prior clause, the full retirement age was 66 years. Therefore, some young people of 62 and 63 years have still not been able to take advantage of the rule, and the youngest in that group will have to wait until the end of 2019 before they can present themselves as spouses first and reap the benefits of the strategy .
Be smart about FAASF
If you're going to turn 66 this year or next, and have not yet filed for Social Security benefits, first consider submitting as a spouse. It will not produce additional monthly benefits for everyone, but if it works for you, it can mean hundreds of extra dollars in your pocket each month for the rest of your life.