The Social Security benefits claiming strategy known as "start, stop, start" was scaled down for individuals, and eliminated for married couples, following the Bipartisan Budget Act of 2015. Here's a look at how it may still maximize benefits for some individuals and the way it used to work.
- "Start, stop, start" is a strategy aimed at maximizing Social Security retirement benefits.
- This loophole was scaled down for individuals and eliminated for married couples in recent years in the wake of new laws passed in 2015.
- This claiming strategy can be complicated; to decide if it's right for you, speak to a Social Security representative or financial advisor to see if it's possible.
Maximizing Social Security Benefits
Most retirees consider their monthly Social Security check a big part of retirement planning. In theory, Social Security seems really simple. You reach age 62, and you can start collecting benefits. Or you wait until normal retirement age (66 for most) to collect a larger benefit. For an even bigger monthly check, wait until age 70. But there are some intricacies of when and how you collect Social Security that can have a huge impact on your lifetime Social Security earnings.
If you start taking your retirement benefits before your full retirement age, your benefits will be at a reduced level. If you continue with your benefits uninterrupted, they will only be increased for inflation.
By starting retirement benefits before your full retirement age, you’re sacrificing the larger base payment you might receive if you start benefits at or after full retirement age. If you wait until age 70 to begin collecting, you’ll garner the largest Social Security payment possible.
How "Start, Stop, Start" Works
Social Security expert Larry Kotlikoff, an economics professor at Boston University, named the ‛start, stop, start’ Social Security approach. The strategy allowed you to receive a benefit at age 62 for a while, suspend benefits, and resume them again later.
The decision to postpone receiving benefits past full retirement age will result in delayed retirement credits. Your benefits will grow 8% each year you postpone taking them until you reach age 70.
This approach may be a way to maximize lifetime Social Security payments for some, but there are caveats. It’s best to use a calculator, such as the one provided by the Social Security Administration, to help understand how this strategy might work for you.
There is no advantage to suspending benefits past age 70.
Prior to the Bipartisan Budget Act of 2015, individuals used to be able to collect Social Security benefits at age 62, suspend benefits, and restart them later. Now, if you collect any time before your full retirement age, you have only 12 months to change your mind—and if you do, you'll have to pay back the monies received. In addition, you can only do this once, and it is considered a withdrawal of benefits by the Social Security Administration.
There is another option. If you have received benefits for more than one year and are no longer eligible for withdrawal of benefits, you are allowed to suspend benefits once you reach full retirement age. Delayed retirement credits will accrue annually until you resume taking benefits or reach 70.
The above scenarios would be viable for someone who initially needs the benefits, but later gets a job or unexpected windfall, for example.
Married Couples Lose a Strategy
A version of the "start, stop, start" strategy that applied to spouses, known as "file and suspend," was phased out and ultimately eliminated by the Bipartisan Budget Act of 2015.
It maximized benefits for married couples where one spouse reached full retirement age and hadn’t filed for Social Security. In essence, it allowed one spouse to collect a spousal benefit and delay their own benefits, which continued to accrue delayed retirement credits.
Here is an example of how it worked, for a married couple named Jenny and David. At age 62, Jenny files for Social Security. When David reaches age 66, his full retirement age, he decides not to collect his own Social Security benefits. Instead, David applies for spousal benefits and collects half of Jenny’s retirement benefit. Since David is age 66, he can collect half of the full retirement spousal benefit. He then waits until age 70 to start collecting his larger benefit on his own account. From then on, David collects his own larger retirement for the remainder of his life.
Following the Bipartisan Budget Act, this option—also called the "restricted application strategy"—was only available to people who were born in 1953 or earlier and was completely phased out for those who hadn't implemented it by April 30, 2016.
The Bottom Line
The "start, stop, start" claiming strategy is complicated. The best way to determine whether you should attempt this plan is to talk to a Social Security representative or consult with a qualified financial advisor. Spend some time planning your Social Security strategy to maximize your lifetime retirement benefits.