(Also read New 2016 Social Security Rules affecting "File and Suspend" Option)
You may have heard about a strategy for receiving benefits called “file and suspend”. This strategy can raise the benefits for qualifying couples through the use of a combination of “spousal benefits” and what Social Security calls “delayed retirement credits”. If you are married and have reached full retirement age, but are not yet 70, you can ask the Social Security Administration to suspend your retirement benefit payments. Doing this can actually increase the total amount of social security retirement income you and your spouse will receive over your life-times.
If you and/or your spouse have reached full retirement age, one of you can apply for retirement benefits now and then immediately request to have your payments suspended, while your spouse applies only for spouse’s benefits. This strategy allows both of you to delay receiving your own retirement benefits that are based on your individual earnings records so you will accrue “delayed retirement credits”. Doing this will increase your future annual social security payments by 8% for each year of suspended payments.
For example: If you suspend at age 66 until age 70, (when you must start receiving your benefit) that four-year suspension will increase your future payments by 32% (8% X 4 years). Here is how it works:
Both now age 66, Bob (who had a higher income than his wife Margaret over the course of his career) files for his full retirement benefits of $2,000 a month, but immediately suspends payments. By doing this, he will begin accruing delayed retirement credits. If Bob then waits until age 70 to start collecting his monthly benefits, they will have increased to approximately $2640, plus any cost-of-living increase due to inflation. When Bob filed for his benefits, Margaret becomes eligible to file for a spousal benefit that is equal to one-half of Bob’s monthly amount (the benefit would be reduced if Margaret were between age 62 and her full retirement age). So Margaret can collect $1,000 a month and continue to accrue her own delayed retirement credits that will boost her retirement benefit when she applies in the future. Until that time, Bob and Margaret benefit by receiving an additional $12,000 annually for 4 years. An added benefit is that (should Bob die) Margaret’s survivor benefits will be greater, since it will equal to Bob’s full retirement benefit that includes his delayed retirement credits.
You do not have to sign or send a written request to the Social Security Administration to suspend benefits, although you can if you want to. It is also possible to make a request to suspend by telephone. Once your benefits have been suspended they will automatically start the month you reach age 70, unless you make a subsequent request to start payments earlier.
If you have been receiving social security benefit payments for less than 12 months, you can retroactively qualify to suspend by withdrawing your claim and repaying all of the benefits that you and your spouse have received during that time.
Once suspended, you can also "unsuspend" your payments at any time before you turn age 70 if you should need to have access to all or some of your suspended payments. This might be desired if there were a need for cash for medical bills, a tax liability, a purchase, or other unexpected financial need. Another reason for unsuspending can be a sudden change in health conditions that makes one's life expectancy shorter, since this may eliminate or reduce the original income objective to receive greater benefits from higher payments over the long-term.
Before You Make Your Decision
Before you decide, you should carefully review your personal finances to make sure you will have enough income (when including the “file and suspend” spousal benefit) to cover your living expenses while you wait for the higher delayed payments.
If you are enrolled in Medicare Part B (Supplementary Medical Insurance), you will be directly billed by Centers for Medicare & Medicaid Services (CMS) for your future Part B premiums, because they cannot be deducted from your suspended retirement benefits. (Exception: If you are receiving benefits as a spouse or ex-spouse, Part B premiums can be deducted from that benefit payment.) If you do not pay the premiums timely, you may lose your Part B Medicare coverage. To help avoid this possibility you have the option to automatically pay the bills from an account at your bank or other financial institution. Also, if you receive Supplemental Security Income (SSI) benefits, suspending your retirement benefits will make you ineligible for SSI.
If you have further questions about your options, you can call the Social Security Administration at 1-800-772-1213 (TTY 1-800-325-0778) or visit your local Social Security office. Information is also available on their website: www.ssa.gov
Greg Tinaglia
(last updated 06.05.2015)