File Now. Suspend Later.

Photo courtesy of Lacey Raper on unsplash.com.

Photo courtesy of Lacey Raper on unsplash.com.

Suspending benefits is a facet of Social Security filing that usually only gets written about in connection with filing – File and Suspend is often referred to as a single act, but it’s actually two things.  First you file for your benefits, which is a definite action with the Social Security Administration, establishing a filed application on your record.  Then, you voluntarily suspend receiving benefits.  If this happens all at once, the end result is that you have an application filed with SSA, but you’re not receiving benefits.  Since you have an application filed (in SSA parlance, you’re entitled to benefits), your spouse and/or dependents may be eligible for a benefit based on your record.

Since you are not receiving benefits, your record earns delayed retirement credits (DRCs) of 2/3% per month that you delay receipt of benefits past your Full Retirement Age (FRA).  (Note: you can only suspend receipt of benefits when you are at or older than FRA, age 66 for folks born before 1955.)

It doesn’t have to happen all at once though.  You could file for benefits and receive them for a few months or a long period of time, and then suspend benefits later in order to receive delayed retirement credits to increase your benefit later.

For example, Tim started receiving his Social Security benefit at age 62, because he figured he couldn’t count on the government to make the funds available for him in the future, and by gum he was going to get what was coming to him.  By starting early, Tim has reduced his benefit from a possible $2,000 (had he waited until FRA to file) to $1,500 per month.  The crazy thing is that Tim has a pension that covers his and his wife Janice’s monthly expenses completely, so he doesn’t really need the SS benefit for living expenses.

A couple years later, Janice explained (tactfully of course) to Tim how he had unnecessarily thrown money away by filing so early.  Since more than 12 months had passed, he couldn’t do anything about it, right?

Wrong – once Tim reaches FRA, he has the option of suspending his benefits, which will provide the ability for his benefit record to begin accruing the Delayed Retirement Credits at the rate of 2/3% per month, or 8% per year.  After four years, Tim’s benefit could be increased by 32%, up to a new monthly benefit of $1,980 per month – almost as much as what his original benefit would have been. (Cost of Living Adjustments have not been factored into the equation.)

Social Security Owner's ManualThe latest edition of A Social Security Owner's Manual, 2013 Edition, can be purchased by clicking this link, or you can get the Kindle version at this Kindle version link.
Post from: Getting Your Financial Ducks In A Row

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File Now. Suspend Later.

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About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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2 Comments

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  • Either could file and suspend – likely in your situation it would make the most sense for the husband, with the higher benefit, to file and suspend at any time before the wife reaches her FRA (and with the changes in the law it must be before April 30, 2016).

    Then when the wife reaches FRA she can file a restricted application for spousal benefits and delay her own filing until a later date if her how benefit can grow to a larger amount than the spousal.

    At any rate, then the husband can delay his benefit until age 70 and accrue the delay credits while the wife is receiving spousal benefits. This is allowed under the new rules since the ages you have given reflect birth dates prior to 1954.

    jb

  • I have read through your “File and Suspend ” strategy but seem to have a little confusion on definition of “Bread Winner” application. Example: Suppose Husband ( age 66, who was “Bread Winner” for 30 yrs, not work currently working due to layoff plans to find work) and wife ( age in 6 months will be 66) currently working full time want to “File and Suspend”. Who files first Husband or Wife?

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