US Budget Deal Will Hurt Some Couples Who Claim Social Security

Social Security File and Suspend

Some couples who claim social security benefits will be hurt by the budget deal that was passed by Congress on early Friday morning.

The rule change goes into effect for new retirees starting in six months. It eliminates a claiming strategy known as “file and suspend.”

That program works by allowing one part of a couple to suspend their own benefit’s, while claiming their spouses for up to four years.

For example, at 66-years-old Jane files for her benefits but immediately suspends them. Her husband, Jack, can start receiving spousal benefits, equal to half of Jane’s full benefit, while Jack’s benefit keeps growing for another four years.

Even $500 per month would equal $24,000 from 66 to 70-years-old.

Because Jack waited until he was 70-years-old, his checks grew by 32%. If Jack’s checks were for $1,000 per month, he would now be receiving $1,320 for the rest of his life.

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In six months, both people in the relationship will need to wait until 70-years-old in order for the 32% jump to occur.

Suspending the program arrives after The Center for Retirement Research at Boston College estimated that 27% of couples could use the “file and suspend” strategy and the cost to the program would be about $500 million.

The Social Security Administration estimates the change won’t save the program any money for the first 10 years.

File and suspend has only been available since 2000. Critics claim only high-income Americans use the opportunity to game the system.