When at least one spouse reaches full retirement age (presently 66), two potentially valuable Social Security claiming options become available: 1) the file and suspend option, and 2) the restricted application (or free spousal) option. The former gets far more publicity, and is better known, than the latter option. But, we find good reason to believe that the media emphasis is misplaced. For optimal Social Security claiming strategies, the restricted application option appears much more important. More on this in a moment.
First, let’s illustrate these options. Consider a married couple, Ted and Nancy. Ted is 66, his full retirement age (FRA). Nancy is 64. Under the file and suspend option, Ted files for Social Security retirement benefits and then immediately suspends receipt of them so that Mary can claim spousal benefits while his benefits continue to grow through delayed retirement credits.
Under the restricted application (or free spousal) option, Ted claims spousal benefits on Nancy’s record, assuming she is already receiving retirement benefits. Since he has reached his FRA, he does not need to claim his own retirement benefits. They can continue to grow to age 70.
Now to our main point. Our custom reports for clients identify the optimal strategies for maximizing the present value of a married couple’s Social Security benefits. We examined a small sample of 40 reports to see how often these two options played a role in the optimal strategy. Here is a summary of the results for two-earner couples with normal life expectancies.
Another way to put it is: file and suspend is recommended in 27.5% (= 10% + 17.5%) of the reports, while restricted application (or free spousal) is recommended in 75.0% (= 57.5% + 17.5%) of them. This huge difference favoring the restricted application option surprised us, given the media emphasis on file and suspend.
The take-away: don’t simply assume that the file and suspend strategy is best for you and your spouse. Odds are it is not.
To find out whether file and suspend, or some other option, is best for you and your spouse, you can order a custom report.