Provided by Clark Kendall
If you or someone you know is set to retire this year, then you have only until April to take advantage of a special provision that is set to expire. The “File and Suspend” provision of Social Security is going to end, and you should take advantage of it while you still have the chance!
This provision was originally created as a way to encourage people to stay in the workforce longer, under the Senior Citizens Freedom to Work Act of 2000. This approach allows those who had already begun to collect their Social Security benefits to stop and start their payments to earn delayed retirement credits. The more people have used this provision, the more it has drained the Social Security fund. As a result, Congress has recently voted to strip this provision from their budget, effective in April.
“File and Suspend” at first seems to be a win-win strategy for everyone. It allows senior citizens to earn additional Social Security credits every year they defer their benefits to the tune of 8% per year. For a married couple, a higher-earning spouse can file for Social Security benefits at the full retirement age of 66 and then immediately suspend them. This allows his or her spouse, who earns less, to receive 50% of the higher earning spouse’s full benefits, which are much higher than the lower earning spouse would be receiving otherwise if they filed for benefits in their own name. Long-term, the couple continues to earn credits at a level higher than the inflation rate, while the higher earning spouse continues to work until age 70. The lower earning spouse then stops claiming their spouse’s benefits and is able to receive their own Social Security checks in their own name.
The largest reason why this impacts Middle Class Millionaires is the extended life span you are enjoying compared to previous generations. “File and Suspend” is most advantageous for long-term married couples who are living longer. You can take full advantage of each other’s benefits while building up monthly and annual benefits for a larger overall payout. You should be considering your longevity to ensure your assets are of appropriate size and allocation to last your lifetime. Another critical component to think about is that with the elimination of “File and Suspend”, senior citizens will now have to rely even more on themselves, as opposed to the government, to secure their retirement comfort and success. It’s important to be proactive and have a plan established so that no matter what the government might institute, you have options and control of your financial future.
About Clark A. Kendall, CFA, AEP®, CFP® Clark Kendall has more than 30 years of experience in investment management and wealth management strategies. He is among a select few wealth managers worldwide who have earned the triple designations of Chartered Financial Analyst (CFA), CERTIFIED FINANCIAL PLANNER™ (CFP®) and Accredited Estate Planner® (AEP®). He has been named one of the Washington metropolitan area’s top wealth managers by the National Association of Board Certified Advisory Practices (NABCAP) and the Washington Business Journal.
As a founder of Kendall Capital Management, Clark provides intelligent, independent financial direction to high-net-worth individuals and families in and around Montgomery County, Maryland – particularly Montgomery County’s “Middle Class Millionaires.” His financial planning analysis, strategies and approach to client service are designed with these clients in mind. As a fee-only, independent financial advisor, Clark is a fiduciary who is held to the highest standard of any professional advisor in the industry. He sits on the same side of the table as the client and utilizes his skills and talents to serve clients with these common goals and concerns.
Clark’s approach is to actively manage portfolios that meet his clients’ goals in a cost effective manner. As a fee-only, independent advisor, Clark has no allegiance or conflicts with other financial organizations for trading or product selection.