Social Security Choices

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The "File and Suspend" Strategy

The "file and suspend" strategy, also referred to as "voluntary suspension," or "claim and suspend," was an option available to Social Security beneficiaries until April 29, 2016. The key advantage afforded by the file and suspend strategy was to increase the Social Security claiming options for many married couples by allowing them to take advantage of spousal benefits and "delayed retirement credits" simultaneously. The Bipartisan Budget Act of 2015, passed by Congress and signed by the President in October, 2015, ended the possibility of claiming spousal benefits on a suspended benefit for suspension requests made after April 29, 2016.

The file and suspend strategy was useful for some couples, but its applicability was often exaggerated by financial columnists. Consider the example of Ken, a 66 year old with a Social Security benefit of $2600 if he were to claim now, and his wife Lois, a 62 year old whose benefit would increase to $600 if she were to claim at 66. Given Lois' much smaller benefit, one might think that Ken filing and suspending now, to provide Lois with the opportunity to claim a spousal benefit while allowing his own benefit to grow until age 70 would be the best strategy. However, it turns out that, given normal life expectancies, it makes more sense for Lois to claim now and for Ken to file a resticted application for "free spousal" benefits while still allowing his own benefit to increase until age 70. The latter strategy would provide Ken and Lois and additional $16,000 in lifetime benefits.

This is not an unusual result. It turns out that despite the popularity of the file and suspend strategy, the restricted application strategy is often preferable from a Social Security benefit maximization point of view. 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:

Graph of Optimal Strategy Occurance

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.

This is great news, because although the benefits of the file and suspend strategy have been eliminated by Congress, the restricted application strategy remains an option for many couples. To find out if the "restricticted application" strategy is an option for you, you can order a custom report.