Unlocking Social Security: The Evolving 'Start, Stop, Start' Strategy Explained
Explore the intricacies of the 'start, stop, start' Social Security benefits strategy, its changes after 2015, and how it may still benefit some individuals. Learn key tips on maximizing your retirement income through informed claiming decisions.
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The 'start, stop, start' Social Security claiming approach, once more flexible, was significantly curtailed for individuals and eliminated for married couples following the Bipartisan Budget Act of 2015. Despite these changes, understanding this strategy remains useful for some retirees aiming to optimize their benefits. Here's a comprehensive overview of how it functions and its potential advantages.
Key Insights
- The 'start, stop, start' method is designed to enhance Social Security retirement benefits.
- Legislative changes in 2015 reduced its applicability for individuals and ended it for married couples.
- Given its complexity, consulting a Social Security expert or financial advisor is essential to assess if this strategy suits your situation.
Maximizing Your Social Security Benefits
For many, Social Security payments form a cornerstone of retirement income. While it may seem straightforward—benefits can begin at age 62 with full benefits at the full retirement age (FRA), which is 67 for those born in 1960 or later—timing your claims can dramatically affect your lifetime earnings.
Claiming benefits before FRA reduces your monthly amount, and continuous receipt only adjusts for inflation. Waiting until age 70 increases your benefits through delayed retirement credits, offering the highest monthly payment possible.
Understanding the 'Start, Stop, Start' Approach
Named by Boston University economics professor Larry Kotlikoff, this strategy originally allowed retirees to begin benefits at 62, suspend them later, and restart to take advantage of growth in delayed retirement credits.
Delaying benefits past FRA increases your payment by approximately 8% annually until age 70, after which no further increases apply.
Although this method can boost lifetime benefits for some, it's complex and requires careful calculation. Utilizing Social Security Administration calculators is highly recommended to evaluate potential outcomes.
Important Considerations
There is no benefit to suspending Social Security past age 70.
Before the 2015 Bipartisan Budget Act, individuals could collect benefits at 62, suspend them, and restart later. Now, if benefits are claimed before FRA, you have only a 12-month window to withdraw and repay benefits to change your decision, and this can only be done once.
However, if you've received benefits for over a year and are past the withdrawal period, you may suspend benefits upon reaching FRA, allowing delayed retirement credits to accumulate until age 70 or until you resume benefits.
This flexibility can be useful if your financial needs change unexpectedly, such as gaining employment or receiving an inheritance.
Changes Impacting Married Couples
The 'file and suspend' variant of the strategy, which allowed spouses to maximize benefits by filing for spousal benefits while delaying their own, was phased out by the 2015 legislation.
For example, previously, one spouse could claim a spousal benefit while delaying their own retirement benefits to accrue delayed retirement credits, maximizing household income.
Current Status of 'File and Suspend' for Couples
Post-2015, the 'file and suspend' or 'restricted application' strategy is only available to those born in 1953 or earlier and was fully phased out for others by April 30, 2016.
When to Collect Social Security for Maximum Benefits
To optimize your Social Security income, consider waiting until age 70 to start receiving benefits, as this timing yields the highest monthly payments.
Defining Full Retirement Age
Your full retirement age—the point at which you qualify for 100% of your Social Security benefits—depends on your birth year. For individuals born in 1960 or later, this age is 67.
Conclusion
The 'start, stop, start' Social Security strategy is intricate and may not suit everyone. To make informed decisions that maximize your lifetime retirement benefits, engage with Social Security representatives or financial advisors and carefully plan your claiming strategy.
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