By: Marc C. Shaffer
As you and your spouse near retirement, have you considered if filing and suspending your Social Security benefits makes sense for your needs and lifestyle? You can only file and suspend benefits if you are at or above full retirement age, but the act allows your spouse to begin collecting spousal benefits, while your benefit accumulates delayed retirement credits. The ability to receive a higher monthly payout before activating your full retirement benefits is an attractive option to many couples, but it is helpful to have an advisor walk you through the specifics before you make a decision.
To illustrate one example of how filing and suspending works, consider this scenario. First, let's assume Jane and John, a married couple, are 66 years old (full retirement age for both of them) and both want to continue working through their 60s and delay Social Security benefits until age 70. If neither chose to file and suspend, they would each have to wait until age 70 to get their maximum benefits. However, there is a way they could start receiving benefits immediately.
Assume that John has a benefit at full retirement of $2,000 and Jane has a benefit at full retirement of $750. Because John has reached full retirement age, he can file and suspend his benefits, allowing Jane, who has also reached full retirement age, to start collecting a benefit of $1,000 a month, which is half of her husband's benefit. Because John is suspending his benefits, he will continue to accumulate delayed retirement credits while Jane is receiving the higher monthly payment ($1,000 vs. $750). When John reaches age 70, he can begin receiving his higher benefit amount which grows at 8 percent per additional year not collected, plus increases over the years due to inflation adjustments. Depending on if Jane filed a restricted application or only for spousal benefits, she could reevaluate her claim at age 70.
Filing and suspending also works for couples with one spouse who did not earn income outside of the home or did not earn enough to qualify for benefits. The age restrictions and regulations for each scenario are set forth by the Social Security Administration.
If you can financially support your family without depleting other retirement assets during the years you are suspending your benefits, filing and suspending may help you boost household income during the waiting period. In addition, when you do start claiming full retirement benefits, your monthly lifetime payment will be higher because you waited to begin collecting and you will have accumulated additional credits. For each couple's situation, there will be a breakeven age you need to reach to have collected/continue to collect more benefits than you would have received using another method. Keep in mind, if you work and claim benefits at the same time, a portion of your Social Security income may be taxed. A financial planner can help you run projections to see which Social Security claiming option would work for you.
Originally published in Mission Hills Arts and Fashion
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