File & Suspend Social Security Benefits April 29, 2016 Deadline – Should I Worry?

Many people are thoroughly confused about all the hype coming out now about the looming deadline for Social Security beneficiaries.  Yes it is true that the “File & Suspend” strategy to get more benefits will expire, and that one must file and request suspension of benefits no later than the deadline of April 29, 2016 to take advantage of the strategy.  But of all the millions who are now searching for an explanation of what this all means, and losing sleep worrying about what happens if they don’t do something NOW, only a relatively small subset of beneficiaries is affected by this, and no one will lose any benefits they are already receiving.  So relax a little as we discuss what this all means, and whether you can forget about it or need to do something. 

The soon-to-be outlawed File and Suspend strategy allows a beneficiary of Full Retirement Age (age 66 for now) to get the advantage of Delayed Retirement Credits (an incentive for not taking benefits currently- see www.socialsecuritybenefitshandbook.com Section 704.6 for more information) which increase the monthly benefits payable by up to 32% after age 70, while at the same time permitting a spouse or child on the account to receive auxiliary benefits (up to 50% of the worker’s benefit).  Using this strategy, the worker files at age 66, then immediately suspends payment of the monthly benefit, but only for himself or herself.  But the government just took this option away from you with the Bipartisan Budget Act of 2015 signed into law last year by President Obama, which is effective April 30, 2016.

First of all, if you were born after May 1, 1950, forget about the File & Suspend deadline.  You can’t use this strategy.  So relax and move on.  But if you were born January 1, 1954 or earlier, Congratulations! You may still use a “Restricted Application” strategy under certain circumstances to claim spousal benefits and defer your own benefit to take advantage of the Delayed Retirement Credit (DRC) incentive.  So while you can relax for now, don’t fall asleep.  If you were born January 2, 1954 or later,  go back to sleep, because that option was also taken away by the recent law.  We will talk more about “Restricted Applications” in a coming post. 

Secondly, if you don’t have an eligible spouse or child, or one who will become eligible before you turn age 70, you won’t get any extra benefits.  The strategy works to allow auxiliary beneficiaries to receive benefits on your account even though you have suspended your own benefits.  So if you don’t have anyone who can collect on your account there is no one to receive the auxiliary benefits.  However, if you want to suspend your benefits for other reasons, you should request that by the April 29^th deadline.  We’ll discuss that below.

Thirdly, if you need the retirement benefit money now and can’t afford to suspend the benefits (most people are in this category), or you want the money now to avoid the risks of suspension (for example if you die before reinstating the suspended benefits, that money is lost), or maybe even if you figure you can get a better return than the 8% annual incentive provided by the DRCs (good luck!) then you don’t have to do anything.  Nothing you are already receiving will be taken away from you. 

But even if you are still working or otherwise not planning to file a retirement claim until some future date, there is an advantage to filing for the retirement benefit and suspending it before the April 29^th deadline.  Whether you file and suspend or not, you will still get the DRC incentive, so why bother filing and suspending?  Well for those of Full Retirement Age by April 2016 (born on or before May 1, 1950) who file and suspend by the deadline, a suspended retirement benefit can be reinstated retroactively upon request without limitation.  So if you suspend now and, for example, two years in the future you need money, you can recover the past two years of benefits.  This can be a godsend if a financial emergency strikes.   

The same person who suspends benefits after April 29, 2016 will only be able to reinstate benefits for the future, effective the month after the reinstatement is requested.  He or she cannot recover past suspended benefits.  So the file and suspend is a sort of insurance against an unforeseen situation where you may suddenly need all the past suspended benefits that have accrued but haven’t been paid. 

We will talk about “Restricted Applications” and “Deemed Filing” in a coming post.

Easy to Get Benefit Estimates

Susan from Ohio, who is now age 61, wants to know how much her social security benefits will be if she retires at 65 (note that this will be a reduced benefit because full retirement age is currently age 66).  It is very easy to request a benefit estimate. You can either go to your local SS office to request it in person (this usually requires a large amount of waiting time in urban areas), you can call, you can mail a written request to the local office, or you can request it online, although you will have to set up an account if you want a Social Security Statement of your actual earnings record.  

The Statement will not be provided immediately.  Expect to wait a month or two.  You will receive a Social Security Statement of your earnings record which will include the estimate.  Make sure you review this to confirm that the reported earnings are accurate, because the amount of your benefits will be calculated based on your earnings.  You can correct errors, but ordinarily you can’t go back more than 4 years.

If you want immediate information, you can get  rough estimates online at the Social Security website. See below for details.

Here are links you may find helpful:

Online Calculator: http://www.ssa.gov/retire2/AnypiaApplet.html

Online Quick Calculator (rough estimate) http://www.socialsecurity.gov/OACT/quickcalc/index.html

The Online page to make an account to manage your benefits, including a request for a Social Security Statement: http://ssa.gov/myaccount/

Phone Number  1-800-772-1213 (TTY 1-800-325-0778)

The Social Security Office Locator: https://secure.ssa.gov/ICON/main.jsp

Remarriage by Widow/Surviving Divorced Wife No Problem (After age 60)

Diane from Utah asks about whether her social security benefits she receives on her ex-husband’s account as a surviving divorced wife will be reduced if she remarries. 

She explains her situation this way “I began receiving social security survivor benefits from my first husband in April of 2013 following my 60th birthday. My first husband died in the year 2000 and I was married to him for 20 years. I had previously divorced him in 1997.

"My current significant other has an insurance plan through his employer and I have a concern as to whether marriage to him would decrease any social security benefits that I am receiving now.

"He is not receiving any social security benefits at the present time as he is only 45 years old. I would greatly appreciate your input regarding this matter.”

Well Diane I am hearing wedding bells! I am happy to advise you that you can go ahead and make your young beau an honest man without worry.  Your remarriage will have absolutely no effect on your benefits because you have passed your 60^th birthday.  Remarriage after that milestone is disregarded by Social Security both for widow’s benefits and, as in your case, surviving divorced wife’s benefits. 

  

And by the way, you had good timing here, because if you had remarried before you turned 60, you would not have been eligible when you applied earlier this year. 

N.B for disabled widows and disabled surviving divorced wives: for you age 50 is the free- remarriage milestone and you can apply for benefits as well at age 50.

Homeschool Students May Qualify For SS Child Benefits

Dennis of Missouri asks about whether or not a homeschooled child can be eligible for child benefits and what are the required documents.  A little background about student benefits: child benefits are terminated with the month the child turns age 18, unless he or she is a full time student in elementary or secondary school (not college), in which case the benefits can continue as long as the child is under age 19.  Social Security does recognize homeschooling as an educational institution if the state where the school is located recognizes the home school as an educational institution, and the Federal standards for full-time attendance are met, which usually means 20 hours per week (there can be exceptions for health) and at least 13 weeks duration of the course.  The program cannot be a correspondence course. And the home school must meet the requirements of state law.  The documentation for this must be obtained from the state and then presented to the Social Security Administration, which will want statements from the home school parent or teacher to establish the hours and duration of the course.  

Here is a link to the SSA's Programs Operations Manual about homeschooling: https://secure.ssa.gov/apps10/poms.nsf/lnx/0300205275

I wish you the very best in your endeavors to educate your children in the best way.

Withholding SS Benefits to Recover VA Debt

Eleanor from upstate New York is having a financial hardship because Social Security is withholding money from her monthly disability checks to recover money she owes to the Veterans Administration. She explains her situation: "I am receiving benefits through SSD, I am a disabled and not able to work. My SSD payments are being garnished from Veteran's system now and it is causing an extreme financial hardship for me to maintain my rent, food, health, etc. I have requested a waiver for hardship through the VA with no response yet from them and the $ are still being deducted from my SSD benefits. Is there any way to stop these deductions to wait and see what the response is on the waiver for hardship?"

The unfortunate answer is no. Under the Debt Collection Improvement Act of 1996 the Social Security Administration must withhold up to 15% of the benefit payment amount from monthly SS benefits to collect delinquent debts owed to a federal agency. They call this the Benefit Payment Offset (BPO in bureaucratese) The benefit payment cannot be reduced to less than $750. The SSA has no authority to make exceptions because that is up to the creditor agency.

But there may be something available for a little bit of relief.  Depending on the individual circumstances, if the total monthly income is less than $797 for an individual living alone, or $976.48 for a couple in upstate New York, you may be eligible for a supplemental payment to bring your household income up to those levels. These payments would be made under the SSI program, or Supplemental Security Income, which is administered by the Social Security Administration. These SSI payments are not subject to the debt collection provisions, so it would behoove Eleanor to go to her local SS office to apply for SSI payments. It just might help, at least a little bit.

Baby Benefits

Larry from Alabama writes to ask if its true that newborn children can receive a benefit on a retiree's account.  Here's how he puts it: "I recently heard that if you are 65 or older and collecting social security as you only means of income; and you have a new born child; social security can or will provide you with a subsidy for your child. Do you know anything about this new program?"

Well Larry this is not a new program at all.  Since 1940 dependent benefits have been available for young children as well as wives and widows  (husbands were not included until much later).  But you must apply for the benefits asap because the application can be retroactive for only 6 months.  And in a rather quirky provision, no benefits are payable for the month of birth, unless the child was born on the first day of the month!  This is because a beneficiary must meet all the eligibility requirements "throughout the month" and one of the requirements is that the baby must be born to be eligible.  No prenatal benefits allowed!

Setting Up Withholding From Checks

Stanley from California writes:

Without going to the SS office in Palm Springs, where do I find the forms to have withholding tax withheld from my monthly checks. I had it done in 2009 then canceled the WH in 2010 because I wasn't working, but guess what, this 80 yr old Pharmacist has been invited back to be PIC (Pharmacist in Charge) of a concierge infusion pharmacy catering to the uninsured elders with means to pay for this service. Your help would be appreciated.
Sincerely
Stanley

ANSWER: Well Stanley congratulations are in order on your new position! Now I wonder what a concierge infusion pharmacy is? But getting back to your question, if you choose to have SSA withhold taxes from your benefits, you must file IRS form W-4v with the Social Security Administration. You can simply mail it to your local SSA office. Here is a link to the IRS for a down-loadable and fill-able form with instructions: http://www.irs.gov/pub/irs-pdf/fw4v.pdf

If you have not been to the locall SSA office lately and want to check for its current location, here is a link to the online SSA office locator: https://secure.ssa.gov/apps6z/FOLO/fo001.jsp

Note that monthly withholding is not required, you can pay directly to IRS with quarterly estimated payments if you are familiar with that process. But I suppose you would prefer the convenience of withholding now that you are going to a very busy man. Again, congratulations.