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Old 04-08-2011, 10:24 AM
 
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I have only recently heard of this file and suspend option where a worker at full retirement age files for SS and then immediately suspends payments, which is usually done so the spouse can begin collecting spousal benefit while the primary worker continues to work and earn so that benefit will be higher.

The articles I have found on it so far, [and nothing about it have I found on the SS website], say that the suspended payment continues to grow by way of COLA, which as we now is not that great currently. It does not mention the 8% increase that benefits earn if you don't file/collect until age 70.

So does someone here KNOW if the suspended benefits continues to grow at the 8% per yr, or is that only if you don't file at all until after beyond full retirement age up to 70?
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Old 04-08-2011, 12:16 PM
 
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Quote:
Originally Posted by arwenmark View Post
I have only recently heard of this file and suspend option where a worker at full retirement age files for SS and then immediately suspends payments, which is usually done so the spouse can begin collecting spousal benefit while the primary worker continues to work and earn so that benefit will be higher.

The articles I have found on it so far, [and nothing about it have I found on the SS website], say that the suspended payment continues to grow by way of COLA, which as we now is not that great currently. It does not mention the 8% increase that benefits earn if you don't file/collect until age 70.

So does someone here KNOW if the suspended benefits continues to grow at the 8% per yr, or is that only if you don't file at all until after beyond full retirement age up to 70?
Supersize-Social-Security: Personal Finance News from Yahoo! Finance

The Restricted Application

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Let's juggle our Jack-and-Jill equation a bit. Jack is still 66 and wants to work until he's 70. Now let's say Jill is also 66 and looking to retire, but her career has earned her a full benefit on her own record. So she won't be drawing on Jack's record. In this case, Jack would not file for Social Security but would instead do what is called "restricting an application" to Jill's benefits only.

What does that do? It allows Jack to file as spouse on Jill's record and earn half of her full benefit while still racking up delayed retirement credits of his own. That means if Jill earns $1,000 a month, Jack will receive $500 a month on her record while he continues working, increasing their family benefit amount 50 percent.

When Jack retires at 70, his delayed credits will bring a higher benefit amount, which would mean a higher survivor benefit for Jill should she outlive Jack.
Social Security Administration spokesman Mark Lassiter admits there's nothing terribly new about these program features. The reset has been around as an escape clause since the dawn of the program for people who wanted or needed to return to work, while file and suspend was enacted in 2000 as part of the Senior Citizens' Freedom to Work Act.
http://www.schwab.com/public/schwab/...fpid=P-1880905

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There is a strategy, sometimes referred to as a 62/70 split, where the lower earner files early at age 62 based on his or her own benefit and then the higher earner later files at his or her full retirement age. At the time of filing, the higher earner suspends his or her benefits until age 70 so that the lower earner can get a bump up, but the higher earner's own benefit continues to accrue delayed retirement credits.

An even better strategy might be for the higher earner to claim benefits at full retirement age based on the lower-earning spouse's record and then switch at age 70 to his or her own higher benefit.

This could be better because the lower-earning spouse's survivor benefit (100% of the deceased spouse's benefit) will still be higher if the higher earner dies first but, meanwhile, the higher earner will be bringing extra income into the household until he or she reaches age 70.

At that point, the lower earner can switch to a spousal benefit based on what the higher earner would have received at full retirement age (again, reduced by the applicable early filing percentage).

As you can see, such strategies can get complex. Before making any decisions, be sure to consult with your certified public accountant (CPA) or other qualified advisor, and also double-check with the SSA.
Be sure of what you want to do and consult with someone as advised to make sure you are doing what fits your specific situation. There are similarities and terms get overlapped that probably shouldn't.
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Old 04-08-2011, 01:59 PM
 
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So as I understand it, in my case when Husband turns 66, FRA he can file and immediately suspend benefits, I will turn 64 3 months later, at that time I can file to collect half minus some percentage, [since I will not be FRA at that point] He can continue to work and his benefit will accrue the 8% a year, [if it is still 8% then] and when he is 70 he somehow reactivates his account and starts receiving benefits at the increased amount.
I continue to receive the reduced amount I have been receiving. Then if he should die before me, I would THEN receive a survivor benefit of his FULL benefit, including the delayed credit amount with no reductions, and I stop receiving the retirement benefit I was receiving.
Note that I am a non working spouse, no record of my own.
Do I have that all correct?
Knowing of course that any of this could change at any time.
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Old 04-08-2011, 04:32 PM
 
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Originally Posted by arwenmark View Post
So as I understand it, in my case when Husband turns 66, FRA he can file and immediately suspend benefits, I will turn 64 3 months later, at that time I can file to collect half minus some percentage, [since I will not be FRA at that point] He can continue to work and his benefit will accrue the 8% a year, [if it is still 8% then] and when he is 70 he somehow reactivates his account and starts receiving benefits at the increased amount.
I continue to receive the reduced amount I have been receiving. Then if he should die before me, I would THEN receive a survivor benefit of his FULL benefit, including the delayed credit amount with no reductions, and I stop receiving the retirement benefit I was receiving.
Note that I am a non working spouse, no record of my own.
Do I have that all correct?
Knowing of course that any of this could change at any time.
Like I said check with either an accountant or SS administration. My understanding that most SS counselors are familiar with the process. If you get one who isn't try again.
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Old 04-08-2011, 06:55 PM
 
Location: Los Angeles area
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Default Oops, hold your horses, everyone.

File and suspend was recently severely restricted by Social Security. Now you must do it within 12 months of starting to draw retirement benefits and you can do it only that once. It is technically called "Withdrawal of Application" and that may help you find info about it on their website.

I suppose Social Security got tired of giving people interest-free loans, which is what it amounted to.
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Old 04-08-2011, 07:06 PM
 
Location: High Cotton
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Originally Posted by Escort Rider View Post
File and suspend was recently severely restricted by Social Security. Now you must do it within 12 months of starting to draw retirement benefits and you can do it only that once. It is technically called "Withdrawal of Application" and that may help you find info about it on their website.

I suppose Social Security got tired of giving people interest-free loans, which is what it amounted to.
Spousal Benefits' "File and Suspend" is not the same as the interest-free loan and payback strategy, which is part of the "Withdrawal of Application" process. The interest-free annuity (loan) and payback strategy has now been changed - basically eliminated. Under the new rules, Social Security beneficiaries may withdraw an application for retirement benefits only within 12 months of their first Social Security payment and are limited to one withdrawal per lifetime. There is little to be gained by investing benefits for only 12 months.

Both strategies (File and Suspend & the Collect and Payback) is/was actually more than just an interest-free loan. For those husband/wife couples that qualify for File and Suspend strategy it is 'extra' unearned money - money that is not reduced from either spouse's benefits, nor ever paid back to the SS Trust Fund money pool. For the now eliminated interest-free "collect and payback" stategy, it took money from the trust fund with no interest being charged while the person's benefits grew without any penalties. While the net amount of the benefit payments were eventally paid back, there was no interest charged or any reduction of the person's future benefits, which was simply stupid on the part of the government. As an aside, I understand only about a thousand people nationwide ever used the interest-free collect and payback strategy, which is oddly a very tiny number. Now with the revised rules (to 12 months) I doubt seriously anyone will use it because it's just not worth messing with it.

Last edited by highcotton; 04-08-2011 at 07:35 PM..
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Old 04-08-2011, 08:31 PM
 
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I agree not worth the mess.
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Old 04-08-2011, 09:23 PM
 
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Originally Posted by highcotton View Post
Spousal Benefits' "File and Suspend" is not the same as the interest-free loan and payback strategy, which is part of the "Withdrawal of Application" process. The interest-free annuity (loan) and payback strategy has now been changed - basically eliminated. Under the new rules, Social Security beneficiaries may withdraw an application for retirement benefits only within 12 months of their first Social Security payment and are limited to one withdrawal per lifetime. There is little to be gained by investing benefits for only 12 months.

Both strategies (File and Suspend & the Collect and Payback) is/was actually more than just an interest-free loan. For those husband/wife couples that qualify for File and Suspend strategy it is 'extra' unearned money - money that is not reduced from either spouse's benefits, nor ever paid back to the SS Trust Fund money pool. For the now eliminated interest-free "collect and payback" stategy, it took money from the trust fund with no interest being charged while the person's benefits grew without any penalties. While the net amount of the benefit payments were eventally paid back, there was no interest charged or any reduction of the person's future benefits, which was simply stupid on the part of the government. As an aside, I understand only about a thousand people nationwide ever used the interest-free collect and payback strategy, which is oddly a very tiny number. Now with the revised rules (to 12 months) I doubt seriously anyone will use it because it's just not worth messing with it.
All reason why someone needs to implement a strategy under the guidance of a good accountant/planner or a SS counselor. They are not the same thing.
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Old 04-08-2011, 10:09 PM
 
Location: Los Angeles area
9,324 posts, read 7,269,587 times
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Quote:
Originally Posted by highcotton View Post
Spousal Benefits' "File and Suspend" is not the same as the interest-free loan and payback strategy, which is part of the "Withdrawal of Application" process. The interest-free annuity (loan) and payback strategy has now been changed - basically eliminated. Under the new rules, Social Security beneficiaries may withdraw an application for retirement benefits only within 12 months of their first Social Security payment and are limited to one withdrawal per lifetime. There is little to be gained by investing benefits for only 12 months.

Both strategies (File and Suspend & the Collect and Payback) is/was actually more than just an interest-free loan. For those husband/wife couples that qualify for File and Suspend strategy it is 'extra' unearned money - money that is not reduced from either spouse's benefits, nor ever paid back to the SS Trust Fund money pool. For the now eliminated interest-free "collect and payback" stategy, it took money from the trust fund with no interest being charged while the person's benefits grew without any penalties. While the net amount of the benefit payments were eventally paid back, there was no interest charged or any reduction of the person's future benefits, which was simply stupid on the part of the government. As an aside, I understand only about a thousand people nationwide ever used the interest-free collect and payback strategy, which is oddly a very tiny number. Now with the revised rules (to 12 months) I doubt seriously anyone will use it because it's just not worth messing with it.
Thank you for your clarification. I apologize that I was confusing two different things as one.
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Old 04-08-2011, 10:23 PM
 
Location: High Cotton
6,131 posts, read 3,713,494 times
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Originally Posted by Escort Rider View Post
Thank you for your clarification. I apologize that I was confusing two different things as one.
No problem. There's no doubt that many plans/policies made by our government can be confusing...and often makes no logical sense. The IRS tax code is one that stands out as the absolute most confusing...
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