When you file and suspend, you are telling the Social Security Administration you want to file for benefits in order to trigger benefits for a spouse or dependent minor child and then immediately suspend your own benefits so you will be worth more when you collect them in the future. You are also locking in a filing date on which your future benefits will be based.
The file and suspend strategy makes sense for married couples where one spouse is the primary earner and the other has little or no work history. In that case, the primary earner could file and suspend to trigger benefits for his or her spouse while his or her own Social Security benefit continues to accrue delayed-retirement credits. That allows the couple to collect some Social Security benefits now and a bigger benefit later. Plus, by delaying benefits for the higher-earning spouse up until age 70 when delayed-retirement credits stop, it is possible to maximize not only Social Security benefits but survivor benefits, too. When one spouse dies, the surviving spouse continues to receive the larger benefit, and the small benefit disappears.
So let's assume Steve and Karen are married and Steve has always been the breadwinner. Let's also assume that at 66 (his full retirement age) Steve's Social Security benefit would be worth $2,000 per month. He could file and suspend his benefits to age 70, but during that four year period Karen could draw spousal benefits of 50 percent, or $1,000 per month until Steve turns 70 and starts drawing his full Social Security benefits. What this does is allow them to draw an extra $48,000 ($12,000 per year x 4 years) until Steve has maximized his benefit at age 70, which would now be worth $2,640 per month since your benefit will increase by 8 percent per year every year after age 66 to wait to start claiming. Steve's actual benefit would be larger due to annual cost of living adjustment.
By utilizing this strategy, Steve and Karen have maximized the amount of Social Security to which they are entitled. Also, if Steve passes away before Karen, they have maximized her survivor benefit since Karen is able to continue receiving Steve's full Social Security benefit for the rest of her life.
Of course, your Social Security claiming strategy needs to be well planned and individualized to your own specific situation. Meet with your financial advisor to discuss what claiming strategy would work best for you and your family.
Andrew Martin
542-4803
This article originally appeared on Santa Rosa Press Gazette: Social Security: File and Suspend