By now the reality of the Social Security Administration’s decision to not increase monthly benefits for 2016 is being felt by those seniors receiving benefits. Accompanying this “freeze” of the monthly benefit came an increase of 2.3% in Medicare Part B coverage resulting effectively in a net decrease of one’s Social Security benefit. Unfortunately for those receiving retirement benefits there was little opportunity to plan ahead.
However, there are more changes coming as of May 1, 2016, which allows seniors to plan appropriately. As part of the budget negotiations, Congress enacted (without hearings and not introducing legislation) significant reforms to the “Senior Citizens Freedom to Work Act” of 2000 which allowed for retirees to suspend benefits after they began while earning delayed retirement credits.
The file and suspend strategy allowed a spouse to file for his or her Social Security and then immediately suspend receiving the benefit. Why would one do this? A working spouse could apply for Social Security so that the other spouse can receive the maximum spousal benefit. Then the applying spouse suspends his or her benefit locking in the other spouses benefit. All the while the suspended benefit is growing at 8% per year up to a maximum of 32% until age 70, when benefits must be taken. Ira J. Brower, President and CEO of Garden State Trust Company said, “that file and suspend has not been eliminated, but during the suspension period the spousal benefit will no longer be available.” He continued, “a new rule goes into effect May 1, 2016. Only those who are age 66 or older before that date may file and suspend their benefits under the old rules.”