By Alex Sutherland
With today’s volatile markets, political uncertainty, and longer life expectancies, retirees are facing greater challenges to feeling financially secure in retirement.
Because of this, the importance of maximizing Social Security benefits is a top priority for many individuals. Many are worried about the future of Social Security and current presidential candidates are not clear on what they would do.
Effective April 30, Social Security will no longer permit a common and powerful strategy known as File & Suspend. The elimination of this strategy may cost retirees thousands of dollars of Social Security benefits. Here’s how this might affect you.
Recently, at my firm we met with a husband and wife, both age 66, who were planning on waiting to elect their Social Security at age 70. They wanted to take advantage of letting their benefit defer and grow (each year you delay, your benefits grow by approximately 8 percent). Each of their benefits would be approximately $2,800 per month at age 70.
However, using the strategy File & Suspend, they could still defer their benefits until 70, while in the meantime they are entitled to collect spousal benefits of approximately $1,000 per month. That’s an extra $12,000 per year for four years. They will still each collect approximately $2,800 per month at age 70. If they do not take advantage of the File & Suspend option, they would give up about $48,000 of additional income from Social Security.
Ever heard the saying, “Have your cake and eat it too”? File & Suspend allows you to collect spousal benefits AND let your benefits continue to grow at approximately 8 percent per year. It’s the best of both worlds! No wonder so many retirees are taking advantage of this now before it’s too late. After April 29, this strategy is off the table and no longer available.
To be able to File & Suspend you must be 66 or older AND submit your request to the Social Security Administration by this April 29. You can submit your request online, at www.ssa.gov/retireonline. The entire process takes about 15 minutes.
What’s the future of Social Security? The elimination of this strategy was signed into law by President Barack Obama in the Bipartisan Budget Act of 2015. It’s likely more changes may affect Social Security in the future. In the latest Trustee report on Social Security, in 2034 funds are projected to be able to pay only 75 percent of scheduled benefits. Currently, Republican and Democratic presidential candidates haven’t offered specific plans to address the Social Security funding issue.
Bottom line: Understanding your Social Security options is critical to maximizing your benefits now and in the future. Make sure you take advantage of filing strategies before it’s too late. April 29 is right around the corner. Because Social Security strategies, laws and taxation can be complicated, the “do-it-yourself” strategy may be costly to you. But if you do seek the advice of a professional, make sure they are an expert in Social Security benefits and taxation.
About Alex Sutherland
Alex Sutherland is a Registered Investment Advisor with LifePlan Group (www.lifeplangroup.com) in North Carolina, a firm established by his father, Ken Sutherland.