If you are nearing the age of Social Security benefits, you are probably thinking about how you can maximize your benefit. If you are married, it becomes more complicated because one person’s benefit may affect his or her spouse’s benefit. File and suspend is an optional method that may help you maximize your spousal benefit.
File and suspend is a benefit allowed to those who qualify for Social Security who are full retirement age (FRA). FRA is a technical term determined by the year you were born. For example, if you were born between 1943 and 1954, your FRA is age 66.
Taking Social Security Based on Your Spouse’s Record
If you are married you have the option to take your Social Security benefit, or half of your spouse’s benefit, whichever is higher (there are some technicalities here that we won’t get into for the sake of brevity). If your Social Security benefit is less than what your spousal benefit would be, it would be more advantageous to apply for a spousal benefit. In order to take your spousal benefit, your spouse has to have filed for Social Security. If your spouse is not ready to take Social Security, the file and suspend strategy is the only way to accomplish this. Only one member of a couple can file and suspend so that the spouse can collect spousal benefits.
Why Your Spouse May Not Want to Take Social Security Right Away
If a person chooses not to take Social Security once he or she reaches FRA, those benefits will continue to increase by 8% per year until age 70 (for those born after 1943). This is called delaying retirement credits. Many people choose to delay retirement credits so they will have a larger Social Security payment later, or because they are still working and don’t have a need for the current cash flow.
Your Spouse Must File and Suspend in Order for You to Take a Spousal Benefit
The file and suspend benefit allows your spouse to delay his or her retirement credits, so that his/her Social Security benefit can continue to grow, but at the same time allows you to collect a spousal benefit on your spouse’s record. You cannot take a spousal benefit until your spouse has filed for Social Security (or filed and suspended).
There are several ways to maximize your spousal benefit. If your spouse is not FRA but you would like to begin receiving benefits, you can take Social Security on your own record. Later when your spouse files for Social Security at his/her FRA, you can switch to take a spousal benefit if it is higher.
Another option is to delay your own credits while you take a spousal benefit. If you have reached FRA, you may take a spousal benefit while you allow your own retirement credits to be delayed so that they continue to grow. At age 70 you may then switch to take benefits based on your own record if they are higher.
A note regarding Medicare: Medicare is not subject to these various timing schemes. Medicare benefits begin at age 65, regardless of your FRA. You should apply three months before reaching age 65.
Consult a Professional
We recommend that you discuss your personal situation with your financial advisor to determine the best option for you. Also, the Social Security Administration is available to help you determine how you may maximize your family’s benefit. There are many details to consider when planning for Social Security benefits and they are certainly not all presented here – so be sure to consult a professional when making decisions.
Harli L. Palme, CFA, CFP®