When to claim your Social Security benefits can be particularly tricky for married couples. There are ways, however, for couples to squeeze more money from Social Security if they understand what their options are.
We’re going to look at one such strategy in this post called file and suspend. Here’s the scenario: A woman wants to retire and start drawing on Social Security, but her husband wishes to keep working. On the surface, this can seem like an intractable problem if the woman intends to claim spousal Social Security. A husband or wife can’t begin drawing spousal checks until their spouse has started drawing on Social Security. A couple can address this issue by using a file and suspend strategy. With this option, the husband, if he has reached full retirement age, can file for Social Security and then immediately suspend the benefits. This will allow the wife to claim her spousal benefit.
Here’s an example that illustrates how this strategy can work: John and Marie have each reached their full retirement age of 66, but only Marie wants to retire. John hopes to keep working until he is 70, which is when Social Security benefits max out. John’s monthly Social Security benefit would be $2,000 if he retired at age 66. If she claimed her own benefit, Marie’s monthly check would pencil out at $900, but if she selected her husband’s benefit (assuming he filed and suspended), her monthly check would increase to $1,000. Because John decided to suspend his payments, his eventual Social Security benefit will grow at 8% a year until age 70. Due to the file-and-suspend strategy, Marie claims the spousal benefit of $1,000 while her own retirement credits keep growing until age 70. (Her own benefit credits continue to increase because she didn’t claim spousal benefits until her full retirement age.) At age 70, Marie switches to the benefits based on her own working life, which are now worth $1,188. File and suspend will not be appropriate for all couples. For instance, it wouldn’t make sense for a husband and wife who have had similar salaries in their careers.
In our previous blog post, we discussed another option for married couples that’s referred to as free spousal benefits. If you missed the post, here it is: Taking Advantage of Free Spousal Benefits