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Maximize Social Security with “File and Suspend” Strategy

Posted by Seton McAndrews | CFP®, Vice President Investments
September 26, 2013

The “file and suspend” strategy can potentially boost your household income immediately, while also allowing for future increases to your social security income. The strategy works well for couples in which one spouse worked (or still works) full-time, and the other spouse didn’t work or only worked for a limited time with limited income.

If your benefit is more than double your spouse’s, this strategy could effectively work as part of your comprehensive financial plan.1

How to Apply the File and Suspend Strategy

To utilize the file and suspend strategy, you apply for retirement benefits at the full retirement age (age 66 if you were born within 1943-1954)2, allowing your spouse to collect their benefits based on your earnings record. Then, you immediately suspend your own benefits and delay claiming them until they are worth more at an older age. Your benefits will increase by an additional 8% for each year you delay collecting beyond your normal retirement age, up until you turn age 70.

Two Examples of the File and Suspend Strategy Applied:

  • Hypothetical Example #1: Husband and Wife Are the Same Age

    Husband and wife are both age 66. The husband has a social security retirement benefit of $2,000, and the wife has a retirement benefit of $900. If the husband files and immediately suspends his benefit, this allows the wife to apply for and collect her spousal benefit, which is $1,000 versus $900. Meanwhile, the husband’s benefit continues to grow by 8% each year until he applies for the benefit or until he turns age 70, whichever comes first. The wife’s retirement benefit also continues to grow by 8% each year during this time.

    • To maximize the benefit, the husband would wait until he turns age 70 to claim his retirement benefit, at which time the wife would also apply to receive her retirement benefit to replace the $1,000 spousal benefit. At age 70, the husband’s retirement benefit will have grown from $2,000 to $2,640, while the wife’s benefit will have grown from $900 to $1,188.

  • Hypothetical Example #2: One Spouse is Older than the Other

    The husband is age 66, and the wife is age 62. The husband has a retirement benefit of $2,000, and the wife has a retirement benefit of $400. The wife is ready to start collecting benefits, but the husband wants to keep working. If the husband “files and suspends,” the wife can collect based on his earnings record instead of hers. The wife’s benefit is reduced because she is collecting early (age 62), but in this case she will receive the spousal benefit of $700 versus her retirement benefit of $300. Meanwhile, the husband’s benefit continues to grow by 8% as long as he keeps working and until the age of 70, where it tops out at $2,640.3

    • To Note: The wife’s retirement benefit does not continue to grow at 8% per year like it did in the first example, because she elected to start taking her benefit early. The most she’ll be able to collect is the $700 per month.

Helping You Decide On An Approach

The “File and Suspend” strategy is just one example of how to get more out of your retirement benefit, and it is not necessarily appropriate for everyone, even if you fit into the above criteria. To discuss your Social Security benefits or plans for retirement, call one of our Wealth Managers at 1-800-541-7774 for a consultation. We’ll help you build a comprehensive plan.
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1 CBS News

2 Social Security Administration

3 Social Security Choices

Additional Disclosure: WrapManager, Inc. is not a tax advisory firm. We recommend you contact your tax attorney or CPA prior to utilizing any of the tax-related strategies mentioned or discussed.

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