Personal Finance

Money Matters: When you should file and suspend Social Security benefits

Q A few months ago you wrote about Social Security and the strategy of one spouse filing and suspending. That spouse would then wait and collect a larger benefit at age 70 and the other spouse would collect spousal benefits. My wife and I are about the same age and both qualify for our own Social Security benefits. Can we each file and suspend, collect spousal benefits and then each switch to our own increased benefit at age 70? My benefit is around $200/month more than my wife’s benefit.

A You could both file and suspend at full retirement age but it’s not going to result in the anticipated outcome. Once a person files for benefits, including filing and suspending, the spousal benefit is limited to the amount over and above your own primary insurance amount, up to 50 percent of the other spouse’s own primary insurance amount. This is the benefit amount you would receive at full retirement age. If you both file and suspend and then try to collect spousal benefits it won’t work because once you have filed, any spousal benefits based upon your spouse’s record will be limited to half of your spouse’s benefit minus your own primary insurance amount.

Example: You and your wife are full retirement age, your primary insurance amount is $1,500 and your wife’s is $1,250. You file for spousal benefits, half of your wife’s benefit is $625 – your primary insurance amount of $1,500 equals negative $875. Your wife files for spousal benefits, half of your benefit is $750 – her primary insurance amount of $1,250 equals negative $500. In effect, no spousal benefit will be available because both of your primary insurance amounts are greater than half of your spouse’s primary insurance amount.

If you file and suspend and your wife files a restricted application for spousal benefits only, you have a much better result. Only one of you can file and suspend while the other applies only for spousal benefits. With this option, your wife receives a spousal benefit equal to one half of your primary insurance amount ($750). Because she has not filed for her own benefit, her primary insurance amount isn’t subtracted from this amount. Then at age 70, each of you files for your own benefit.

For those not familiar with the file and suspend tactic, here is a brief explanation: A spouse must file for benefits before the other spouse can receive spousal benefits (unless one is caring for a qualified child). A spouse must also be 62 years old to receive spousal benefits; if a widow or widower, benefits may begin at age 60. A spouse may receive Social Security benefits even if they have never worked under the Social Security system. Spousal benefits may be up to half of their spouse’s primary insurance amount. If one begins spousal benefits before full retirement age, the benefit amount will be permanently reduced based on the number of months until that age. For people born between 1943 and 1954, that is 66.

Delaying benefits beyond full retirement age will result in an increased benefit by the Delayed Retirement Credits. This increase is significant, 8 percent a year up until age 69. There is no advantage to delaying benefits once a person turns 70. A spouse can apply for benefits at full retirement age and ask that the payments be suspended. By doing so, they will receive delayed retirement benefits and their spouse is then able to apply for spousal benefits. Spousal benefits don’t include any delayed retirement benefits, so a spouse applying at full retirement age will provide the maximum spousal benefit.

For more information visit the web site ssa.gov or call 800-772-1213, if you are deaf or hard of hearing call 800-325-0778.

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