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Now's your last chance to use these Social Security strategies

As a result of Congress' passing a new federal budget — likely by the end of April — you will no longer be able to use two Social Security strategies: "file and suspend" and "restricted application."

Depending on your situation, these strategies greatly increase the amount you receive from Social Security — for some, by tens of thousands of dollars over a lifetime. And the retirees most likely to benefit from them are high-income married couples. No wonder Congress killed them.

Close-up of social security cards
Glowimages | Getty Images
Close-up of social security cards

So should you file before these strategies go away?

Here's what you should know first: You can't start to receive Social Security retirement benefits based on your own work record until you reach age 62. If you choose to receive benefits at that time, you'll get only 75 percent as much as if you waited until your full retirement age (FRA) — generally, age 66.

And even that amount isn't the highest benefit you can get. You'll get more each month if you wait until you're 70 years old; your benefit then will be 132 percent of your FRA amount. (There's no point in waiting past age 70, because your benefit won't increase further.)

So the longer you wait to start benefits, the more you get each month. But delaying has a price, because no one knows how long you'll live.

"The file-and-suspend strategy has you file at your FRA and then immediately suspend the benefit. Assuming your spouse is at least age 62, he or she can start to collect his or her spousal benefit, while you delay the start of yours."

Both the file-and-suspend and restricted application strategies require that you're married; they allow your spouse to collect benefits while your benefits grow to age 70.

For example, say you earn more than your spouse. The file-and-suspend strategy has you file at your FRA and then immediately suspend the benefit. Assuming your spouse is at least age 62, he or she can start to collect his or her spousal benefit, while you delay the start of yours until you reach age 70.

The restricted application strategy causes your (lower-earning) spouse to file for his or her benefit, and you file for the spousal benefit. At age 70, you switch to your benefit.

Here's what the demise of these filing strategies means for you:

  • If you or your spouse are collecting benefits: Nothing changes; you will continue receiving your benefits just as you always have.
  • If you are a widow or widower and are, or will be, collecting survivor benefits: Nothing changes.
  • If you or your spouse are eligible to receive benefits but one or both of you haven't yet filed: You might still be able to take advantage of these strategies. Talk to your financial advisor right away, before the deadline.
  • If you and/or your spouse are not yet eligible to receive Social Security retirement benefits: These strategies may not be available to you by the time you retire.

It's worth noting that you can still voluntarily suspend benefits. This means you can start benefits prior to FRA, and at FRA suspend benefits to earn delayed retirement credits. Referred to as the "start, stop, start" strategy, it applies if you realize you should have waited to start to receive benefits. By voluntarily suspending at FRA and earning delayed retirement credits, you'll get a higher payout when you restart benefits.

But be careful when doing this, because you also suspend benefits for anyone receiving money based on your work record — such as your spouse.

— By Ric Edelman, founder and CEO of Edelman Financial

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