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.

When the Payment Date Is A Sunday

Ramon from California writes:

I receive my check on the 3rd of the month, which falls on Sunday. Will it be delivered on Saturday or Monday?

ANSWER: When the payment date is on a Saturday, Sunday, or a legal Federal holiday, the check will be dated for the first day before that is not a Saturday, Sunday, or legal Federal holiday. So this year the checks will be paid on Friday, April 1. Let's see if there's any April Fool's jokes in the envelope.

Widow's Benefit On Top Of Disability Benefit

Suzanne from Florida writes:
I only have one question - I am 58 years old and am on social security disability. My husband is 78 years old and gets regular social security. If he dies (heaven forbid) do I get any of his benefits as a survivor on top of my disability payments????

ANSWER: Yes Suzanne, you would be eligible for a widow's benefit even though you are under age 60 because you are disabled. Disabled widows are eligible as young as age 50 if totally disabled. The benefit would be reduced for age as if you were age 60. The difference between your disability benefit and the widow's benefit would be added to your disability amount, so although you would be receiving two benefits, the total would be no higher than the widow's benefit amount alone. Of course, if your own disability benefit is higher you would continue to receive that. You could also defer receiving the widow's benefit to full retirement age to get an unreduced benefit then if it is higher.  But let's hope you don't need to consider these things for a long, long time!

Disability Benefits at 62 Years Young

Mark from Hawaii writes:

In February I became 62 but I have been disabled from work since 52 years old. Do I get an increase in my pay for being 62 years young?
Mahalo and thank you.

ANSWER: Sorry Mark, no. The disability benefit amount is already figured as if you were at Full Retirement Age when it was awarded. At Full Retirement Age (age 66 for you) the disability benefit will be converted to a retirement benefit, but the amount stays the same.

Child Under 18 Paid All Year

Kathy from Ohio writes:

For a child under 18 and in school, on Social Security benefits, are the benefits paid all year long or only when the child is in school--nine months?

ANSWER: Yes they are paid all year long. When the child turns 18, if he or she is in secondary school, benefits continue till graduation. If the child takes secondary school level courses after graduation, benefits can continue up to age 19 if the child is in full time attendance, and even a couple of months after 19 depending on the school program.  The benefits are paid during vacation months, unless the child turn 19 in non-attendance month, at which time they stop.

Delayed Retirement Credits Not For Wife Or Child

Bill from Missouri writes:

Thank you for making your book "Social Security Benefits Handbook" available on the internet. It is the clearest and most helpful resource I have found. I have a question.
I am 61 years old. When I file for Social Security benefits sometime between age 62 and 70 my wife and disabled child will become eligible for payments equal to 1/2 of my monthly benefit. If I then exercise my option to either suspend my payments, or invest them and return them to the Social Security Administration at age 70, thus making my payment go up by 32%, will my wife's and my child's payments also go up by 32%, or will their payment amounts always be based on my benefit back at the time I originally applied?
Thank you for your help.

ANSWER: Thank you for your very kind compliment. I wish I could have better news for you, but no, the Delayed Retirement Credits are not applied to your wife's or child's benefits. The amount of your increased retirement benefit however will be used to figure a widow's benefit if you should predecease your wife. And by the way, if you take benefits before 70 and then withdraw the application and pay them back to get the 32% increase, you would also have to pay back the wife and child benefits paid on your account, which makes that a less desirable option.

Husband's Earnings Don't Count Against Wife's Own Benefits

Wayne from Minnesota writes:

I am writing after reading your book SS Answer Book. I am 61 and will continue to work for 3-4 more years. My wife is 61 and "retired" last year. We file our taxes jointly. Can she file for SS benefits at 62 regardless if I am still working full-time and our "joint" income exceeds the limit for SS? She will not have any W-2 income, just income from her investments.
Thank you

ANSWER: Good question Wayne, but not to worry, if she is filing on her own earnings record. She can collect her own benefits without your earnings having any effect. It is only if she collects a spouse's benefit on your account that your earnings may be considered for withholding of benefits. Of course, her SS benefits may be subject to taxation by IRS.

Changing to Widow"s Benefit

Gail from Indiana writes:

My father-in-law passed away two weeks ago. What do we need to do to change the social security status to widow for my mother-in-law?

ANSWER: Sorry to hear of your family's loss. If your mother-in-law was receiving spouse benefits on your father-in-law's account, it is a simple matter. Simply call SS toll free at 1-800-772-1213. They may have already been informed by the funeral home. Otherwise, they may need a certified copy of the death certificate. If you need to visit your local SS office, here is a link for the online office locator. https://secure.ssa.gov/apps6z/FOLO/fo001.jsp If your mother-in-law has a benefit on her own account as well as as a spouse, and if she is under Full Retirement Age (FRA), she may consider deferring the widow's benefit until FRA to maximize the monthly amount. In thatb case she should go to the SS office to discuss her options.

Delayed Retirement Credits After Reduced Widow's Benefits

Anonymous from Florida writes:
My ex passed away when we were both in our 50's, and I came across a copy of your excellent reference book [Social Security Benefits Handbook]. So at age 60 I filed for and receive reduced SS survivor benefits on the record of my ex. Your book indicates in an example that I can change to a full benefit on my own record when I reach my FRA. What isn't indicated is whether that change could occur at any age I'm eligible for a higher benefit on my own record. In particular, can I continue the survivor benefit as long as I wish, thus delaying my benefit until age 68 or 70 and receive delayed credits. If this is possible, do I need to inform SSA of my intentions at some point?

ANSWER: Thank you for the compliment about my book! I do appreciate it. The direct answers to your questions are: yes, you can delay filing for your own retirement benefit so as to maximize the amount of delayed retirement credits, and no, you don't have to inform SSA of your intentions, until you make the application. You can file for the retirement benefits on your own account whenever you wish, whether before or after FRA (full retirement age). If you file before, the benefit will be reduced for age, but if it's higher than the widow's benefit and you need the money, you can do this. Or, as you indicated, if you want to wait to get the Delayed Retirement Credits, you can do that too. In short, you can file for your own benefits whenever it is advantageous for you.

Student benefits

Marlana from Indiana writes:
I need to know if I will be able to receive my check from my dad’s disability Social Security when I start college this fall. I will be 18 in June but will still need help for some of my college expenses.

Answer: No, sorry to tell you. Your Social Security benefits as a child terminate when you turn 18 unless you are in high school, in which case they can continue up to the end of the semester that you turn 18. These benefits are no longer payable for college students.

Divorced Wife Benefits

Janet From Alaska writes:
My ex husband has been disabled since 2004 and I was married to him for 18 yrs. I am on ssi supplementary income also. At what age would I be able to get his ssi.? I was born in 1961. Thanks

ANSWER: You will never get “his SSI” because that is a federal welfare program for the aged, blind and disabled who are in need. You are already receiving SSI youself. You are probably thinking of divorced wife's benefits on your ex-husband's account. You will be eligible for these benefits at age 62, if your ex is eligible for social security benefits on his work record. Should he die before you, you may be eligible for surviving divorced wife's benefits at age 60, or at age 50 if you are totally disabled at that time, and if you are not remarried.

Age 62 Retirement

Marilyn from Alabama.
My husband was diagnosed with COPD in 2009. He works as a multi drop driver for a stationary company. He has lost time from work with infections and is finding the lifting harder. They have given him lighter duties but are now looking into getting rid of him as he is 62. Will he be entitled to any benefits and can they terminate his employment.

Answer: Your husband will be entitled to a reduced retirement benefit when he applies. If his medical condition prevents him from working he could possibly be eligible for Social Security disability, which is an unreduced benefit. If he stops working he should definitely apply for both benefits. Whether the company can terminate him is an area of state law but if they fire him for age, that would be age discrimination in violation of a federal statute. If that occurs you should consult with a local attorney.

Check for Deceased Beneficiary

Betty from Montana
If a person dies February 28 at 4:00 a.m. does the Social Security check received in February have to be returned to Social Security? I can understand returning the March check but not the February. Thank you.

ANSWER: You are right. The check received in February is actually payment for the month of January, because Social Security pays in arrears (this does not apply to SSI checks which are paid for the current month). So if the person dies in February the check received in that month is for January and is payable to the surviving spouse with whom the decedent was living at the time of death, or who was entitled as a spouse on that account. If there is no such spouse, then SS will pay to certain relatives (children/parents/widow) according to a priority system. I describe that system in my Social Security Benefits Handbook in Section 1408.

Chris from Michigan

How do I find how much I would need to pay back to "restart" my
monthly benefit for a larger amount? Started benefits at 62 and am now 65...Is there online table available?
Thank you,
Chris

ANSWER:  Wow Chris, you'd have to withdraw your application and pay back all benefits you have received, and if anyone else received on your account, those benefits would have to be repaid too.  So just add up all those benefits, and that's what you have to pay back.