Married Couples Can Maximize Their Social Security Benefits Using File and Suspend

UPDATE: A new law that will go into effect on April 29, 2016, will eliminate this strategy. Under the new law a spouse cannot begin receiving benefits until the worker is actually receiving benefits, too. Workers can still file and suspend, but spouses (or other dependents, including minor and disabled children) cannot receive benefits during the suspension. The law does not affect workers who have already filed and suspended benefits before the effective date. Workers who are at least 66 or will turn 66 before the effective date of the law may still file and suspend in order to trigger benefits for their spouse. 

Are you married, with one spouse wanting to retire but the other one prepared to keep working? If so, you should take a close look at the "file and suspend" strategy to maximize your Social Security benefits.

Spouses are entitled to Social Security benefits on their husband or wife's work record provided the marriage lasted at least 10 years. If the spouse who is not working or who wants to stop working is at full retirement age or caring for a child who is under 16 years old, he or she is entitled to an amount equal to one-half of the working spouse’s full retirement benefit. If the non-working spouse takes the working spouse's benefits before his or her own full retirement age, the amount received will be reduced.

In order to receive the spousal benefit, the working spouse must have filed for Social Security retirement benefits.  But the working spouse can continue working using the file and suspend strategy, which can be used as long as the worker has reached full retirement age (age 66 for those born between 1943 and 1954).   

It works this way: the working spouse files for benefits and then immediately suspends them. Once the worker suspends benefits, the non-working spouse can begin receiving spousal benefits while the worker continues to work. The longer the worker delays retirement, the more delayed retirement credits he or she will accumulate. Social Security benefits can increase by as much as 8 percent a year (depending on date of birth) if a worker delays retirement beyond full retirement age. 

Example: Husband and wife are at full retirement age. Wife wants to start collecting benefits and husband wants to continue working. If husband retired now, he would receive $2,000 a month. Husband files for benefits and immediately suspends. Wife files for spousal benefits. She receives $1,000 a month on his work record. Husband continues to work and retires at age 70. When he retires, he can get as much as $2,800 a month in benefits.

This strategy can work either if you, as the non-working spouse, are retiring early or if you are retiring at your full retirement age, but for it to be to your advantage you must receive lower benefits on your own record than on your spouse's record. If you retire before your full retirement age, Social Security will automatically give you whichever benefit is higher--your own benefit or the spousal benefit.  If your own benefits are higher and those are what you receive, you won't continue to build up delayed retirement credits.  If you retire at full retirement age, you can choose which benefit to take. This allows you to take a spousal benefit while your worker's benefit accrues delayed retirement credits.

Example: Husband and wife are both at full retirement age. Husband's benefit is $2,000 a month. Wife would receive $900 a month in benefits if she received benefits on her own work record. Husband files and suspends. Wife receives $1,000 a month of spousal benefits on husband's work record. At 70, wife can claim on her own record which, because of delayed retirement credits, will have grown to more than $1,000 a month.

While it may sound complicated to file for worker benefits, apply for spousal benefits, and then suspend worker benefits, it can be done in one visit to your Social Security office. For more information about suspending benefits, click here.

For more information about Social Security benefits, click here.

This isn't the best strategy for everyone. To find out if will work for you, contact your elder law attorney.