Social Security Choices

The "File and Suspend" Strategy

Some couples pick up as much as $60,000 in extra benefits by using this strategy. We can show you how.

A strategy that many married couples will find valuable is "file and suspend," sometimes referred to as "voluntary suspension," or "claim and suspend." File and suspend is sometimes referred to as a "strategy" or "option," but as they refer to the same thing we will use them interchangably from here on out. File and suspend increases the Social Security claiming options for many married couples by allowing them to take advantage of spousal benefits and "delayed retirement credits" simultaneously.

Under current law a spouse cannot claim a spousal benefit unless the main beneficiary claims benefits first. However, once full retirement age (FRA) is reached (age 66 for those born between 1943 and 1954), a beneficiary can file for benefits, but then immediately suspend receipt of those benefits until some future date. By doing this, his or her spouse can claim a spousal benefit and the main beneficiary can let his or her own retirement benefit grow at 8 percent per year. In addition, if both spouses have reached FRA, it is possible for the spouse's own benefit to grow due to delayed requirement credits if he/she elects to receive free spousal benefits (also referred to as the restricted application option). Learn how these strategies can benefit you by ordering a custom report now!

Here is an illustration. Suppose a married couple, Ken and Lois, have just turned 66. Lois wants to retire at 66, while Ken wants to work until 70. Ken's monthly Social Security retirement benefit would be $2000 if he claimed them at age 66. Lois' monthly retirement benefit at age 66 is $900. If she could claim spousal benefits, her monthly check would be $1000, one-half of her husband's age-66 benefit, but Lois cannot claim a spousal benefit unless Ken files for his own retirement benefits. Ken wants to let his Social Security benefits continue to grow until age 70, when his benefits will grow to $2640 per month (This increase comes from Ken's "delayed retirement credits.")

Taking advantage of the file and suspend option, Ken can file for benefits at age 66 and then immediately suspend receipt of those benefits. His monthly benefits will, as a result, continue to grow, so that he can get the delayed retirement credits and receive at least $2640 a month when he claims benefits at age 70. With Ken "filing and suspending," Lois can now claim spousal benefits of $1,000 a month while letting her own retirement benefits grow until age 70. At age 70 her monthly retirement benefits, which will grow because of delayed retirement credits, will be $1188 (=$900×1.32). At age 70 she can claim the higher retirement benefits on her own record.

The file and suspend strategy is also potentially useful for couples in which only one person has reached FRA. In this case, the benefit of the main beneficiary will continue to grow, but the spouse's benefit will not. The advantage to the spouse, however, is that he or she has the opportunity to draw a spousal benefit in addition to his or her own benefit when the file and suspend option is utilized. See the example below for an illustration of this case.

Joe has just reached his FRA of 66. His wife, Mary, will turn 62 in a couple of months. Joe's benefit at FRA is $2000 a month. Mary's benefit at her FRA is $400 a month, reflecting a limited work history. Mary wants to retire and start Social Security at age 62 while Joe wants to work until age 70. If Mary claims just her own retirement benefits, she gets $300 a month (= $400×0.75) because of the early retirement penalty. However, Joe can file for his own retirement benefits and then suspend receipt of them until age 70, earning delayed retirement credits until that time. Using this strategy, Mary can now claim spousal benefits at age 62 and receive $720 a month. She'll get her own benefit of $300 plus a 70 percent of the spousal benefit available to her, which is $420 (= 0.7×($1000−$400)). And Joe can grow his monthly benefits to at least $2640 a month as a result of his delayed retirement credits.

While these examples illustrate how the file and suspend strategy can be very useful, it is not necessarily the best strategy. Indeed, we have found that utilizing free spousal benefits is better in many instances. 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.

To find out which strategy `file and suspend', `restricticted application option', or another option is best for you, you can order a custom report.