A new budget bill will end the “file-and-suspend” Social Security strategy, which many married couples use to help boost their total benefits, and provides relief for pending premium hikes for Medicare Part B beneficiaries.
You can claim Social Security benefits as early as 62, but there may be financial advantages to waiting to start claiming, with benefits accruing each year you delay until age 70. Using the file-and-suspend method, if you are married and both you and your spouse worked, you could choose to claim your benefits at full retirement age (66 for those born between 1943 and 1954), suspend that claim so that your benefits continue to accrue, and file a restricted application for a spousal benefit. Your spouse can then collect a portion of your Social Security benefits to which he or she is entitled, given that you already filed for your benefits. Couples choosing to file-and-suspend can receive more in total benefits over the course of their retirement.
If you have already chosen the file-and-suspend option, your choice will be grandfathered in and you will experience no changes. The option will be eliminated beginning six months after the President signs the bill into law, so you may want to consider contacting your advisor in the meantime to determine if this strategy is right for you.
Medicare Part B relief
The budget agreement also will ease the 52% increase in Medicare Part B premiums that were set to go into effect in 2016. Medicare Part B is medical insurance that covers the costs of doctor’s visits and medical services and supplies, but beneficiaries must pay a monthly premium. The 30% of Medicare beneficiaries who do not deduct that premium from their Social Security check were slated to see a sharp uptick in their monthly payment. However, the budget agreement also includes a loan from the U.S. Treasury to help cover part of the premium increase, meaning that premiums will now rise 15% in 2016 instead of 52%.
Get help making choices
Choosing when and how to claim your Social Security benefits and funding healthcare expenses in retirement are complex decisions. It's important to understand how benefits are calculated and how your individual circumstances affect your retirement income needs. The Social Security Administration and Medicare’s website is filled with information and provides a good place to start. However, consult with your TIAA-CREF advisor and a reputable tax advisor to explore your options.