One way to boost retirement income!

Social Security: File-and-Suspend for Higher Benefits
If you're married and looking for opportunities to
increase retirement income, you may want to
look closely at your Social Security benefits.
One opportunity for maximizing Social Security
income, called "file-and-suspend," may enable
a married couple to boost both their retirement
and survivor's benefits.


What is file-and-suspend?
Generally, a husband or wife is entitled to
receive a Social Security retirement benefit
based either on his or her own earnings record
(a worker's benefit), or on his or her spouse's
earnings record (a spousal benefit), whichever
is higher. But under Social Security rules, a
husband or wife who is eligible to file for
retirement benefits based on his or her
spouse's record cannot do so until his or her
spouse begins receiving benefits. However,
there is one exception--someone who has
reached full retirement age may choose to file
for retirement benefits, then immediately
request to have those benefits suspended, so
that his or her eligible spouse can file for
spousal benefits.

File-and-suspend is a strategy that may be
used in a variety of situations, but is commonly
used when one spouse has much lower lifetime
earnings, and thus will receive a higher
retirement benefit based on his or her spouse's
earnings record. (A husband or wife's spousal
benefit may be as much as 50% of what his or
her spouse is entitled to receive at full
retirement age.) Using this strategy not only
allows the eligible spouse with lower earnings
to immediately claim a higher (spousal)
retirement benefit, but can also increase the
amount of available survivor protection. The
spouse with higher earnings who has
suspended his or her benefits can accrue
delayed retirement credits at a rate of 8% per
year (the rate for anyone born in 1943 or later)
up until age 70. Because a surviving spouse
will generally receive a benefit equal to 100% of
the retirement benefit the other spouse was
receiving (or was entitled to receive) at the time
of his or her death, suspending a benefit to
accrue delayed retirement credits may
substantially increase the survivor's benefit.


Example
Let's look at one hypothetical example of how
filing for, then suspending, Social Security
benefits might help a married couple increase
their retirement income and survivor's benefits.
Henry is about to reach his full retirement age
of 66, but he wants to postpone filing for Social
Security benefits. At full retirement age his
monthly benefit will be $2,000, but if he waits
until age 70 to file, his benefit will be $2,640
(32% more) due to delayed retirement credits.
However, his wife Julia, who has had
substantially lower lifetime earnings than Henry,
wants to retire in a few months at her full
retirement age (also 66). Based on her own
earnings record, Julia will be eligible for a
monthly benefit of $700, but based on Henry's
earnings record she will be eligible for a
monthly spousal benefit of $1,000 (50% of
Henry's entitlement).

So that Julia can receive the higher spousal
benefit as soon as she retires, Henry files an
application for benefits, but immediately
suspends it. That way, he can also continue to
earn delayed retirement credits, which will
result in a higher monthly retirement benefit for
him later.

Using the file-and-suspend strategy not only
increases Julia and Henry's retirement income,
but it also offers increased survivor protection.
Upon Henry's death, Julia will be entitled to
receive 100% of what Henry was receiving (or
was entitled to receive) at the time of his death.
So by suspending his own retirement benefit in
order to increase it through delayed retirement
credits, Henry has ensured that Julia will
receive a survivor's benefit that is up to 32%
higher for the rest of her life should he die first.
(Note, though, that this hypothetical example is
for illustrative purposes only and does not
account for cost-of-living adjustments or taxes.)
Points to consider
• Deciding when to begin receiving Social
Security benefits is a complicated decision.
You'll need to consider a number of
scenarios, and take into account factors such
as both spouses' ages, estimated benefit
entitlements, and life expectancies. A Social
Security representative can help explain your
options.

• Using the file-and-suspend strategy may not
be advantageous when one spouse is in poor
health or when Social Security income is
needed as soon as possible.

• The spousal benefit will be reduced if the
spouse claiming it is under full retirement age.