In an attempt to close a ‘loophole’ they claim is exploited by ‘evil one-percenters’ Congress has done away with a very useful planning strategy – File and Suspend.

File and Suspend allows spouse #1 to file for and immediately suspend receipt of benefits until a future date up to age 70. This allows spouse #2 (if eligible to receive benefits) to begin claiming spousal benefits.

For example assume Husband implements File and Suspend. Husband does not receive current benefits. Future benefits increase at 8%/yr via the delayed credit. Wife collects current benefits based on Husband’s benefit while earning delayed credits on her own benefits should she switch to it (if greater) in the future.

Beneficiaries currently operating under a File and Suspend strategy will not be impacted. Once the legislation is enacted (it awaits President Obama’s signature) and using the above example Wife could not collect benefits during Husband’s suspension period.

The strategy is a useful one independent of any politically-charged and socially-divisive rhetoric. It allows maximizing a couple’s lifetime Social Security benefits via the indirect 8%/yr ROR in situations where immediate benefits of both spouses aren’t necessary for day-to-day spending. Many people beyond the ‘rich’ fall into this category…but let’s not let facts get in the way of a good story!