For years, “File & Suspend” has been a popular strategy for married couples to maximize their social security benefits upon retirement. However, due to the Bipartisan Budget Act of 2015, this option may no longer be available as of April 30th, 2016. What does this mean for you? If you are married and you or your spouse are between the ages of 66 and 70, you have until 4/30/16 to “File & Suspend”, meaning that you file for your social security benefits, allowing your spouse to claim his/her spousal benefit, but you immediately suspend the collection of your own benefits so that they continue to grow until you are ready to retire and begin collecting.
Here’s an example of File & Suspend in action:
Suppose a married couple, Ken and Lois, have just turned 66. Lois wants to retire at 66, while Ken wants to work until 70. Ken’s monthly Social Security retirement benefit would be $2000 if he claimed them at age 66. Lois’ monthly retirement benefit at age 66 is $900. If she could claim spousal benefits, her monthly check would be $1000, one-half of her husband’s age-66 benefit, but Lois cannot claim a spousal benefit unless Ken files for his own retirement benefits. Ken wants to let his Social Security benefits continue to grow until age 70, when his benefits will grow to $2640 per month (This increase comes from Ken’s “delayed retirement credits.”)
Taking advantage of the file and suspend option, Ken can file for benefits at age 66 and then immediately suspend receipt of those benefits. His monthly benefits will, as a result, continue to grow, so that he can get the delayed retirement credits and receive at least $2640 a month when he claims benefits at age 70. With Ken “filing and suspending,” Lois can now claim spousal benefits of $1,000 a month while letting her own retirement benefits grow until age 70. At age 70 her monthly retirement benefits, which will grow because of delayed retirement credits, will be $1188 (=$900×1.32). At age 70 she can claim the higher retirement benefits on her own record.
This strategy can also be useful to those couples for which only one spouse has reached full retirement age, as seen in this example:
Joe has just reached his FRA of 66. His wife, Mary, will turn 62 in a couple of months. Joe’s benefit at FRA is $2000 a month. Mary’s benefit at her FRA is $400 a month, reflecting a limited work history. Mary wants to retire and start Social Security at age 62 while Joe wants to work until age 70. If Mary claims just her own retirement benefits, she gets $300 a month (= $400×0.75) because of the early retirement penalty. However, Joe can file for his own retirement benefits and then suspend receipt of them until age 70, earning delayed retirement credits until that time. Using this strategy, Mary can now claim spousal benefits at age 62 and receive $720 a month. She’ll get her own benefit of $300 plus a 70 percent of the spousal benefit available to her, which is $420 (= 0.7×($1000−$400)). And Joe can grow his monthly benefits to at least $2640 a month as a result of his delayed retirement credits
Not sure if this applies to you? Want to File & Suspend but not sure how to proceed? Let us know, we can help!