“File and Suspend” your Social Security benefits to boost your household income now - and later

“File and Suspend” Your Social Security Benefits to Boost Your Household Income Now – and Later

What you don’t know matters just as much as what you do know! And in most of the cases that I’ve witnessed – in the personal finance arena, of course – it seems to be what we don’t know that prevents us from achieving our goals.

Jack, age 66, has been married to 63-year-old Maggie for nearly 44 years. Maggie never worked outside the home, but Jack has worked for a local company for the past 36 years. In recent months, some things have changed that have created the need for the couple to bring in a little more income. Maggie thought that since he’s reached 66, his full retirement age (FRA) for Social Security purposes, Jack should apply for his benefit to meet their needs.

There was a problem, though. Jack wants to work for four more years – waiting until he reaches 70 to retire – so that he can receive the maximum Social Security benefit possible. Understandably, there was a bit of tension between the usually happy couple. The great news, however, is that it was completely unnecessary. You see, Jack and Maggie didn’t know that they were perfect candidates for the “file-and-suspend” strategy of claiming Social Security.

First of all, although Maggie hasn’t worked outside the home and therefore has no work record of her own, she qualifies for benefits on Jack’s record, now that he’s reached his FRA. In fact, she could have qualified once she reached the age of 62, although her benefits would have been reduced since she’s younger than her FRA.

The second piece of great news for this couple is that Jack can stick to his plan of working four more years without losing any benefits. He will still earn the 8 percent increment over the next four years.

Here’s the strategy: Jack files for benefits but does NOT collect anything. Sounds kind of odd, but they are two different things, filing and collecting. Although Maggie qualifies for benefits based on Jack’s record, Maggie cannot collect her benefits until Jack has filed but not necessarily collected his benefit. So Jack files and immediately suspends his benefits – so he wouldn’t actually collect anything in his name. Jack’s benefit today is about $1,700 a month, but because he’s suspending it, he will grow it by 8 percent a year until he reaches 70, at which time he’ll begin collecting about $2,300 a month (in today’s dollars). Maggie, on the other hand, gets to collect a reduced spousal benefit of about $680 immediately.

It’s a great ending for everyone. Maggie brings in an extra $680 a month to tackle their needs today. Jack continues to earn delayed retirement credits, therefore increasing his benefit. Interesting isn’t it? To learn more about this and other incredible ways to maximize your family’s Social Security benefits download our complimentary special report. What you don’t know indeed matters!

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