I want to thank everyone for the overwhelming response to my new book, The Little Black Book of Social Security Secrets. We’ve received an unprecedented number of phone calls and emails from readers who have read it, and who now realize that the choices that they make about Social Security can have an enormous impact on their retirement years. Many of you want to know if you’re making the right decision about when to collect Social Security, and have written with the specifics of your situation. Unfortunately, I just cannot answer all of your questions personally. But what I will try to do on this blog is address some of the major issues that seem to be of the most concern to my readers. Before I do that, though, I want to give you a general reminder.
Reasons you should not apply and suspend Social Security
If you are or will be least 66 years old by April 29, 2016, then you really should consider filing for and suspending your benefits on or before April 29, 2016. There are two situations where it might not be beneficial, and they don’t apply to a lot of people. But here they are. If you are contributing to a Health Savings Account (HSA), you need to know that filing for Social Security (even if you suspend your benefits immediately) will trigger your automatic enrollment in Medicare Part A. Once you are enrolled in Medicare, you can’t contribute to an HSA. The tax benefits of contributing to an HSA can be nice, but, unless your employer is currently making the contributions on your behalf, those benefits are generally eclipsed by the cash benefits of Social Security. If this applies to you, then you might want to talk to your Human Resources department to see if you might be eligible for alternative compensation.
The second reason you might not want to file for and suspend your benefits would be if there is a chance that you might want to later file a restricted application for spousal benefits. You can’t do both. So if you file and suspend, you will not be allowed to file a restricted application! We’ve actually had a lot of questions on this topic, and I do plan to give some detailed examples of how the restricted application works in just a few days.
What to expect if you do apply and suspend Social Security
But let’s assume that you are not contributing to an HSA, and you’re not planning on filing a restricted application. What happens if you file for your benefits and suspend them by April 29, 2016? Since you will not be receiving a check from Social Security, there are no income tax consequences that might surprise you next April. If you change your mind later and want to start receiving your checks, you can do so – and your check amount will be permanently higher than if you filed but did not suspend. Once you have filed, your spouse can apply for spousal benefits and collect them even while your own are suspended.
New hope for those who thought they were too young to apply and suspend Social Security
Were you born in May, June, July or August of 1950, and are cursing the fact that you’re just a little too young to take advantage of the file and suspend technique? Here’s an idea for you. After the book was published, we realized that there was a nuance not addressed in the legislation eliminating the file and suspend technique, which might enable more people to get in under the wire than we originally thought. This is because the Social Security Administration allows you to apply for benefits up to four months before you actually want to start collecting them. Does this mean that you might be able to take advantage of the file and suspend technique too? Unfortunately, no one knows for sure. If you fall into this category, I would suggest that you apply for benefits before you turn FRA – and by April 29, 2016 – and ask that they be suspended. At worst, they will tell you that the suspension didn’t occur until after you turned FRA – that is, after the deadline. And who knows, they just might say that your application falls under the old rules! The one thing I know for certain is that, if you wait until after April 29, 2016 to apply, the advantage for suspending will be lost. Under the new rules, your spouse will not be able to collect a spousal benefit unless you are collecting your own benefit.
I will start to publish some case studies soon based on questions that our readers have asked after reading The Little Black Book of Social Security Secrets. Stop back soon to see how real people like you are dealing with this important issue, and the best courses of action they have available to them. Remember, the decisions you make can provide your surviving spouse with a significantly higher guaranteed income, for the remainder of his or her life.
Are you confused about how the Apply and Suspend strategies can benefit you? Please do not ask your local Social Security office for advice, because they can only present your options about government benefits! The decisions that you make about this affect far more than just your Social Security benefits, and could have unintended complications and/or repercussions if they are not made considering the big picture.
Getting your Social Security decision right is important, but it is even more important that you have the right strategies for all of your planning. To find out if your entire financial house is in order, fill out this pre-qualification form by clicking here to see if you qualify for a free consultation. Western PA residents only please.
Don’t delay. Go to www.paytaxeslater.com/ss to get your free digital copy of The Little Black Book of Social Security Secrets, and then talk to a professional about your options before it’s too late.