07 Sep Get the most from Social Security benefits

Q. I didn’t know we couldn’t do File and Suspend any more, and this changes things for when we can retire. Is there anything we can do? I’m 60 and my wife is 61.
— Getting closer

A. Let’s first talk about what File and Suspend was for Social Security recipients.

It used to be that an individual could file for their Social Security benefits and immediately suspend them. This opened the window for their spouse to file for a spousal benefit that was half of the primary worker’s benefit, while the primary worker continued to see their benefit grow by 8 percent annually until their age 70, said Matthew Masterson, a certified financial planner with RegentAtlantic in Morristown.

The Bipartisan Budget Act of 2015 eliminated the File and Suspend and Restricted Application options.

In order to avoid the impact, you must have turned age 62 by the end of 2015 and would had already “filed and suspended” your benefit by April 30, 2016, Masterson said.

Unfortunately, because you did not meet the age cut off, the Bipartisan Budget Act of 2015 eliminated this option for you and your wife.

“While it can certainly be frustrating to see a benefit you planned to utilized taken away with such short notice, it is also important to keep the change in perspective,” Masterson said. “Generally, the maximum benefit the File and Suspend strategy could have added to your retirement is $50,000 to $60,000. This is certainly a substantial amount of money but not an insurmountable change, especially with some time left until retirement.”

You have a few options to consider to adapt to the change.

Masterson said you may consider an increase in savings if your cash flow allows between now and your planned retirement, or potentially consider a retirement date slightly later than you had initially planned.

“Each year that you can postpone withdrawals from your portfolio can have a significant impact on the potential success of your retirement,” he said.

Another option, and one that Masterson said individuals often take advantage of, is working part-time early in retirement. Earlier on in retirement individuals are generally very active and still very much in the mindset of going to work every day, he said.

“Working part-time to replace the lost Social Security income could be a solution,” he said. “Another option, if your planning allows, is to take additional withdrawals from your portfolio during the years you would have taken advantage of the `file and suspend’ option.”

He said all of these options can help to fill in the gap left by the elimination of the File and Suspend strategy.

While this change has eliminated some creative options, your Social Security election is still critical to your retirement, he said.

“Social Security remains a rare asset in that it lasts for your life and keeps pace with inflation,” Masterson said. “While everyone’s decision is dependent on their other available assets as well as their annual needs in retirement, it generally continues to make sense for the individual with the higher benefit to delay until 70, as their benefit will grow by 8 percent per year and you will maximize the potential survivor benefit.”

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This post was first published in September 2016.