Maximizing Your Social Security Benefit – One Strategy
Written by Stacy Akaka
When couples are approaching retirement age and determining the best strategy for receiving their social security benefits, there is one strategy commonly known as ”file-and-suspend” that will allow one of them to start receiving benefits while simultaneously grow both of their long-term benefits.
This strategy requires one spouse to file for benefits but then suspend them immediately, allowing delayed retirement credits to be earned while simultaneously still allowing the other spouse to begin to receive spousal benefits. Individuals who elect to receive the spousal benefit at their full retirement age, delay their retirement benefit and allow it to grow, typically at a rate of 8% per year. The spousal benefit is also available prior to your full retirement age, however the Social Security Administration will deem that you are applying for both your own retirement benefit and your spousal benefit therefore you will not accrue retirement benefits.
Your spousal benefit is available if your spouse is either collecting a retirement benefit or has filed and suspended his or her benefit. The Social Security Administration precludes both spouses filing and suspending and both collecting spousal benefits, therefore you should review the benefits of both scenarios and compare the two.
Below is an example:
John and Jane are both age 66, their full retirement age, and both elect to file and suspend their retirement benefit. John earned a higher income than Jane, therefore Jane files for her spousal benefit and receives $11,000 annually. John’s and Jane’s retirement benefit continues to grow and at age 70 is projected to be $29,500 and $23,000, respectively. John and Jane also receive other retirement income therefore it is feasible for Jane and John to delay and maximize their Social Security benefit.
Determining whether to utilize the spousal benefit strategy should be based primarily on cash flow needs in retirement. In certain situations receiving a benefit earlier may be more beneficial than receiving a larger benefit later. Individuals must have an understanding of their retirement income needs prior to selecting a strategy.