Critter Corner: When it Comes to Social Security, what does “File and Suspend” Mean?

—

Dear Clay,

For married couples, a Social Security claiming strategy known as “file and suspend” may help to boost their retirement income.

A person files for Social Security retirement benefits at full retirement age (FRA), but then suspends payment of them. By filing for benefits, that person’s spouse and dependents are eligible for retirement benefits at the time of the filing. And by suspending the benefits, the person can still earn delayed retirement credits (DRCs) that increase the future retirement benefit by 8% per year until age 70.

What you should know:

• The primary reason to file and suspend is to allow your spouse to file a spousal benefit based on your earnings record.

• It’s not possible to file for a spousal benefit unless your spouse has already filed for his or her own retirement benefit.

• By filing and suspending, you can make your spouse eligible to take a spousal benefit while allowing your own retirement benefit to increase because of DRCs.

• File and suspend only applies to the retirement benefit of the person who is taking the action. You can’t file and suspend for a spousal benefit or a survivor’s benefit.

• If you’ve begun taking your retirement benefit before FRA, you cannot suspend this benefit until you’ve reached FRA. After that date, you will only suspend—you wouldn’t need to file and suspend, because you’ve already filed.

• If you have begun receiving retirement benefits before your FRA, and you decide at or after your FRA to suspend them, you do not have to repay Social Security any of the benefits you’ve already received.

Financial planners often suggest that couples wait until the older spouse turns 60 to figure out exactly what claiming strategy would be best for them, because then, they will have a better sense of what their Social Security retirement benefits will be. Health and work considerations should also factor into Social Security claiming strategies.

Please keep in mind that according to CNBC, there have been “some concerns that the option might disappear. President Barack Obama’s proposed budget for fiscal 2015 hinted at the possibility, proposing “to eliminate aggressive Social Security claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits.”

Hope this was helpful!

Arfs and Kisses,