Today, we remember a beloved social security planning strategy. File and Suspend died on November 2, 2015 after a long battle with the Bipartisan Budget Act of 2015. Throughout its lifetime, File and Suspend built an esteemed reputation as a planning strategy for couples, where one spouse chose to work past full retirement age.
Its calling in life was to help others. Known for Restricted Application and Voluntary Suspension, a combination of the two allowed individuals eligible for social security benefits to delay receipt, so that the value of their benefit could be maximized. All the while, the non-working spouse was able to receive social security income, to help supplement the couple’s living expenses.
File and Suspend will be remembered in three forms, based on an individual’s date of birth before January 2, 1954:
1) Grandfathered: Anyone who has already completed a restricted application or voluntary suspension will not be impacted by the legislative changes.
2) Born May 1, 1950 or earlier: File and Suspend will be available as long as voluntary suspension occurs before April 30, 2016.
3) Born on or before January 1, 1954: Restricted Application will be available after an individual reaches full retirement age.
For individuals born on January 2, 1954 or later, File and Suspend strategies will not be available at all. While we should celebrate the life of File and Suspend, we must begin to move on. Without this strategy to aid in our planning, it is critical that we reassess our financial plans and ready ourselves for a life without this cherished approach.
All joking aside, we are disappointed to see File and Suspend go, but we do not believe this legislative change should be a cause for concern. To date, we have never observed the additional cash flow provided by this strategy to be the element that determines a financial plan’s success or failure. Nevertheless, it will have an impact on cash flow in retirement, so we encourage those nearing retirement to take note of the difference.