File & Suspend

Suppose a married couple, Joe and Barbara, have just turned 66. Barbara wants to retire at 66, while Joe wants to work until 70. Joe’s monthly Social Security retirement benefit would be $2000 if he claimed them at age 66. Barbara’ 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 Barbara cannot claim a spousal benefit unless Joe files for his own retirement benefits. Joe 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 Joe’s “delayed retirement credits.”) Taking advantage of the file and suspend option, Joe 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 Joe “filing and suspending,” Barbara 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.

The file and suspend strategy is also potentially useful for couples in which only one person has reached Full Retirement Age (FRA). In this case, the benefit of the main beneficiary will continue to grow, but the spouse’s benefit will not. The advantage to the spouse, however, is that he or she has the opportunity to draw a spousal benefit in addition to his or her own benefit when the file and suspend option is utilized. Consider 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 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.

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