There are many ways to skin a cat when it comes to maximizing retirement benefits. One strategy is to file and suspend social security benefits. First let’s decipher what this means and then we’ll determine if it’s a good strategy for you.
What Does File And Suspend Social Security Mean?
This is a strategy you can use to allow your spouse or a dependent child to start claiming benefits while you continue to grow them. Here’s how it works. At your normal retirement age you file for SSI. This allows your spouse to collect social security benefits. But you immediately suspend your claim and this means that your benefits grow by 8% per year. The result of this is that your spouse collects benefits now and your benefits continue to grow. When you ultimately put in for social security at 70, you’ll get the maximum SSI benefit.
Who Does This Work For?
This might be a great strategy for you if your spouse isn’t eligible for a large SSI benefit based on their own Social Security earnings. It’s even more beneficial if you are planning on working until age 70 anyway. The only downside to this is that you can’t implement this strategy until you reach normal retirement age.
Are There Any Other Strategies That Are Worthwhile to Consider?
Yes. Another tactic you might think about is to voluntarily suspend your SSI. This approach allows you to start cashing SSI checks at age 62 (with a 25% reduction in benefits). At normal retirement age you can voluntarily suspend your benefits until age 70. When you do reach that golden age, your benefits will be just about as great as they would have been had you waited until normal retirement age to collect. I know this sounds complicated but let’s break it down. You’ll see how simple this really is.
At age 62 you file for benefits. But instead of receiving $1000 a month (the amount you would have received had you waited until your normal retirement age) you receive $750 a month. This is the 25% hair cut I referred to above. Now, at 66 you voluntarily suspend your payments. As a result, the benefits grow by 8% a year for 4 years. That means your suspended benefit of $750 will grow by 32%. So when you celebrate your 70th birthday, your checks will be $990 a month. That’s pretty close to the $1,000 you would have received had you not taken benefits between the ages of 62 and 66. Not bad.
Would either of these work for you? Why or why not?
What is your Social Security strategy? Would either of these ideas make sense for you? Why or why not?