Like most couples planning for retirement, the two of you are counting upon your Social Security benefits to provide part of the income you will need for the rest of your lives. And yet, the government program has grown so large, involving so many complicated decisions, that it can be difficult to know how to maximize your potential benefits. Many couples have planned to use the file-and-suspend option, but due to recent budget cuts that method of filing for your benefits will soon disappear!
As you might already know, your final benefit amount is not set in stone. You will receive your full scheduled benefits if you wait until your “full retirement age” to claim them (defined by the Administration according to your year of birth, and ranging between 65 and 67 years old.). However, you can also claim your benefits as early as age 62, if you're okay with receiving less than your full scheduled check amounts. Or, you can wait as late as age 70 to claim your benefits, and earn higher monthly checks for life.
Sound complicated enough? Well, here's where it gets even trickier: your spouse also has to decide when to claim their benefits, and when one spouse has lifetime earnings that are significantly greater than the other spouse, you face even more choices about your Social Security benefits.
Some couples have figured out a way to maximize their collective benefits, using a strategy called “file and suspend”. The higher-earning spouse files for their benefits at full retirement age, but suspends payments until a later date. This allows their benefits to grow at a rate of about 8 percent per year, and nets them a larger check when payments do begin later.
Meanwhile, the lower-earning spouse files for spousal benefits, which amount to about half of the higher-earning spouse's benefit. This allows the couple to receive some money from Social Security, while the higher-earning spouse continues to work and postpone their own payments.
As you might have imagined, this strategy can help you and your spouse maximize your retirement income. But there’s a catch: On November 2, Congress passed a budget deal that will bring an end to the file-and-suspend strategy. The new law won’t take effect for six months, giving you and your spouse time to file and suspend if you have both reached full retirement age. You might have a big decision to make, and very soon!
But here's the bottom line...
There are dozens of different strategies that can be used by married couples to claim their Social Security benefits. Selecting one strategy over another can make a significant difference in the amount of money you collect during your retirement years. However, not all options can be used by everyone, and sometimes one option is better than another, based on your situation. It is important to know that once you begin receiving Social Security payments, it can be extremely difficult to make any changes. Therefore, before making any decisions, call our office to schedule an appointment. We can review your retirement plan with you, and help you make the decisions that are best for your situation.
15050 - 2015/11/16
Carstens Financial Group focuses on providing comprehensive asset management, estate planning and life insurance solutions. Allow us to help you secure your financial future.