The budget deal between Congress and President Obama to avoid another debt-ceiling showdown could cost some Americans thousands of dollars in Social Security benefits. The deal gets rid of the “file-and-suspend” strategy that allows a retiree’s spouse to collect benefits even when the retiree is not. Under an amendment to the bill, the changes will only affect future filers and not anyone who has already implemented the strategy.
Here’s how that strategy works:
Americans who wait longer before claiming Social Security receive a larger monthly benefit. File at 70 and you get your maximum benefit, a monthly paycheck that is up to 76 percent bigger than the one you would have received if you filed at age 62.
Using the file-and-suspend strategy, a retiree can file and immediately suspend their Social Security benefits to lock in the maximum benefit later on. At the same time, the retiree’s spouse can start receiving their spousal benefit right away without affecting the amount of the retiree’s benefit at 70.
The strategy has also allowed ex-spouses and spouses who care for grown disabled children to receive special Social Security benefits immediately even if the retiree is not claiming his or her benefits.
Soon, that will no longer be the case, thanks to the budget deal.
The new rule goes into effect in six months.