Close Close

Retirement Planning > Social Security

Social Security: 5 tips for clients post-file and suspend

Your article was successfully shared with the contacts you provided.

Law changes emerging from Congress within the Bipartisan Budget Act this past November have led to distress and/or confusion within the retirement community. That’s because of a provision called the “closure of unintended loopholes,” which could punch a $50,000-plus hole in the retirement plans of married couples nationwide. 

If you or your clients are feeling a little disgruntled by this decision, you’re not alone. I know my team and I are sad to see this option disappear for so many of the pre-retirees we’ve worked with.  As an agent or advisor, however, you need to switch gears and think about how you’re going to help prospects and clients make the most of the new dynamic it creates. 

What we’re losing 

If you aren’t familiar with the file & suspend strategy, it went like this: Matthew and Sarah have both reached their full retirement age (FRA) of 66, but are in great health and want to keep their positions in the workplace for the next four years while they allow their Social Security benefits to accrue delayed retirement credits and get that coveted 132 percent benefit check for the rest of their lives. 

In the meantime, our industrious couple can collect up to $64,000 more in benefits from Social Security over the course of the next four years, all without cutting into their own retirement credits. 

How? Under the old rules, Matthew and Sarah could go into their local Social Security office where one of them — let’s say Sarah — files for benefits.  

Then the other, Matthew, files a restricted application for his spousal benefit. Finally, Sarah suspends her benefit so that she can continue to accrue her delayed retirement credits while Matthew collects his spousal benefit based on her account. 

Each month for the next four years, they’ll receive a check for half of Sarah’s primary insurance amount — a useful bonus savvy couples have been taking advantage of for years. 

But it’s going away? 

That’s right. As part of the Bipartisan Budget Act of 2015, the ability to collect benefits based on a suspended account and the ability to file a restricted application will be phased out in two separate steps. 

To understand those steps, let’s take a second to quickly review the difference between “file and suspend,” and filing a “restricted” application, which often get confused since they so often get rolled up into the same strategy. First, “file and suspend,” in its intended form, is actually not going away. Per our earlier example, Sarah can still file for her benefits and then suspend them any time after she reaches FRA to continue to accrue those valuable delayed retirement credits (DRCs) — like, say, if she retires and then decides to go back to work. 

The difference is that after April 29, 2016, if Sarah suspends her benefits, she’ll be able to accrue DRCs, but nobody else will be able to collect benefits based off her account. (Officially, the cut-off date is April 30. But because it’s a Saturday and your clients won’t be able to take advantage of this strategy on April 30, you can help protect them by not suggesting it.)  

But what if Sarah suspends her benefits before the cut-off? Will Matthew stop receiving his spousal benefit May 1, 2016? 

No. You may have seen some confusion about this point because, as the law was originally written, he would have. But Congress added an amendment so that couples who take advantage of this loophole before the cut-off date will continue to receive those benefits without interruption. 

The second cut-off date to be aware of concerns restricted applications, which will work a bit differently.

Normally, retirees who file for benefits are considered to be filing for all their benefits and will receive the greater of either their personal or their spousal benefit (which is half their spouse’s primary insurance amount or PIA). This is why Matthew in our earlier example filed a restricted application when he and Sarah were planning to use the file and suspend strategy. A restricted application allowed him to apply for only his spousal benefit while his own benefit continued to accrue DRCs. 

If your clients will be 62 or older by January 1, 2016, then they will be eligible to file a restricted application in the future, when they reach their full retirement age. These clients don’t need to (and, in fact, many can’t) take action now. It just means they’ll have the option to when they reach FRA. 

For those clients who hadn’t turned 62 by January 1, restricted applications will not be available at any point, even after they reach FRA. 

What now? 

While this is bad news for many pre-retirees, you can best help your clients by easing the transition for them and finding ways they can adapt to these new terms. Here are 5 suggestions.


1. Reach out to affected clients 

Be proactive about calling clients who will be affected by these changes and inviting them back to the office for an in-person meeting to talk about what the new law will mean for their retirement and what they can do now to make sure they still have a pleasant retirement. If possible, raise the topic with a friendly phone call rather than sending out an impersonal blanket email. 

2. Deescalate clients hit hardest 

The revisions to Social Security law might not be your doing. But you’ll find that clients are more likely to give you their business if they can leave your office feeling better about their retirement prospects than when they came in. 

When working with seniors who will lose this important benefit, keep in mind the same principles you always want to use when working with scared and frustrated customers. 

Listen first. Always. Ask them questions about what they’re most afraid of and work to address their specific worries. As with most fears, the more detailed you can get about what’s bothering them, the better they’ll feel and the easier it’ll be for you to find new solutions. 


3. Explain to clients the reasoning behind the law change 

As important as file and suspend was to the retirement plans of seniors across the United States, it’s important to recall the origin of this strategy: It was a loophole. 

Not only was file and suspend a Congressionally-inadvertent way for couples to secure a few extra benefits, but it didn’t always exist. It’s a relatively new ability that emerged from the Senior Citizen’s Freedom to Work Act, passed in 2000. 

Clients will benefit from viewing their couples’ benefits in the same way they would have if they were planning pre-2000 when file and suspend was not a possibility. 


4. Run multiple scenarios based on new conditions 

Despite fewer rules and possibilities to account for, figuring out how to claim Social Security benefits post-file and suspend will be more complicated. For some, it may mean having to seriously consider collecting benefits earlier than they had originally intended.  

That means substantial changes to how they prepare for retirement could ripple out into other aspects of their financial strategies. When looking at these new scenarios, you may have to spend a little extra time getting creative with their options until you can find an acceptable plan. 


5. Use this opportunity to offer alternative solutions 

Without the extra bump from Social Security, many pre-retirees may be looking for products, vehicles, and riders they may not have had a need for before. This is the perfect opportunity for you to offer a solution that can help them accomplish their retirement goals without file and suspend. 

See also: 4 things you need to know about the Social Security spousal benefit

This recent change to how we guide and advise our clients to get the most out of their retirement plans is a reminder that the game is always changing. And we therefore need to remain flexible and always alert to new possibilities available to those we serve.  


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.