The Social Security Collection Strategy That Expires Soon

by: Robert Kron

A Social Security collection strategy used by many couples to maximize benefits will not be available to new users on April 30. This tactic, known as File and Suspend, allows the higher earner of a couple to file for Social Security retirement benefits but suspend taking them. In doing so, the spouse and any eligible dependents can collect benefits on the higher earner's record while the individual benefits accrue an 8% annual increase, or delayed retirement credits (DRCs). The higher earner then collects his or her increased individual benefit at age 70, potentially maximizing Social Security benefits for his or her family. Here's a look at how DRCs add up:

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How does the end of File and Suspend, as we know it, affect me?

First and foremost, it's important to note: Anyone currently using this strategy will be unaffected by the change. And some lucky folks can still get in on it.

Specifically, if you're aged 66, or will be on or before April 29, 2016, or if you're already full retirement age and not collecting Social Security benefits, you may want to consider whether File and Suspend is an appropriate strategy for you. Not only might you maximize your retirement benefits, but you retain an option to request a lump-sum distribution of all suspended benefits, if so desired.

That is, at any point before age 70, you can request full payment of the retirement benefits that accrued while collection was suspended. (But keep in mind that you forfeit any DRCs).

If you request suspension after the deadline, you lose the ability to request any retroactive payments, even the six months available to those who do not request suspension at all.

For those without a "lucky birthday" - that is, if you will not be 66 by April 29, 2016 - you may want to take a closer look at your retirement income strategy overall. Social Security is just one part of a successful plan - not the entire solution. Remember that annual Social Security payments averaged $16,000 for individuals and $25,000 for couples in 2014.

The Social Security changes that go into effect this month highlight the need to carefully assess how much income you'll need in retirement and how you'll fund it. The sooner you start planning, the closer you'll be to a fulfilling and financially fit retirement.

For more information visit socialsecurity.gov.

This post originally appeared on the BlackRock Blog.