Source: Social Security Administration.
Many people complain that Social Security has more benefits
for married couples than it does for single people. And indeed
there are many strategies couples can use to boost their total
family benefits, though they rely on both spouses working
together to produce the best possible outcome.
But one strategy that most people think of as being for
couples can actually give singles some financial flexibility in
their retirement as well. Meet the file-and-suspend strategy.
The basics of file-and-suspend
In general, the file-and-suspend strategy gives couples the
flexibility to get some benefits immediately while boosting their
total payouts from Social Security later. If you're married, you
can generally claim Social Security benefits either by using your
own earnings history or by claiming spousal benefits that are
based on your spouse's work history.
To use the file-and-suspend strategy, you wait until you reach
full retirement age. At that point, you can file for benefits
based on your own work history. That's a necessary step in order
for your spouse to claim spousal benefits. If you did nothing
else, then you at that point would get regular Social Security
benefits, and your spouse's benefits would be based on your
spouse's age and your Social Security payment.
But to implement the file-and-suspend strategy, you then
immediately suspend the benefits you're entitled to receive. That
means you won't get monthly payments, even though your spouse
will. But it does mean your own benefit will grow, entitling you
to monthly payments that are as much as 32% larger if you wait
until age 70 before you start receiving them.
File-and-suspend for singles
The primary advantage of file-and-suspend for couples is that it
adds spousal benefits to the mix. But if you're not married,
no spousal benefits, so it's fair to ask how file-and-suspend can
be of use to singles.
The reason singles should consider a file-and-suspend strategy
has to do with the way the Social Security Administration treats
people who have suspended their benefits. Consider: If you expect
to wait until age 70 to start taking Social Security and
therefore don't file for benefits until then, then once you start
receiving monthly payments, they'll be about 32% higher than they
would have been if you'd taken them at normal retirement age. If
you change your mind between ages 66 and 70, you can receive
slightly smaller monthly payments at any time by filing for
benefits at that point. What you
get, though, is back payments for what you
have received under Social Security if you'd filed at age 66.
That's where the file-and-suspend strategy comes in. If you
file for benefits at your normal retirement age of 66 but then
immediately suspend them, then you'll have the option later to
collect higher monthly payments when you decide to start taking
them. But you also have another choice: You can collect a lump
sum based on the total payments you would have received if you
hadn't suspended your benefits.
Source: SSA Office of the Inspector General.
Showing you the money
For example, say your work history entitles you to $1,000 in
monthly benefits at full retirement age, but you decide instead
to wait until age 70. Your expectation is that you'll receive
$1,320 per month at age 70 because of the additional delayed
retirement credits you'll earn. As it turns out, though, you need
money sooner than that, and you decide to take benefits at age
If you didn't file and suspend, then your only option is to
take benefits at age 68, with two years of delayed retirement
credits boosting your monthly payment to $1,160. But if you did
file and suspend, you'd have another option: collecting a lump
sum equal to 24 months of the $1,000 payments you
have been entitled to at age 66 if you hadn't suspended your
benefits. That's a total of $24,000.
There's a trade-off with this method, though. If you take the
$24,000 lump sum, you don't get credit for having waited for your
benefits. Therefore, going forward, you'll only get $1,000
monthly rather than $1,160. For many people, though, the lump sum
is much more valuable, as it can get them out of an immediate
Social Security is full of tricks like this, and it's
important to know as many of them as you can. Even though
file-and-suspend is mostly for married couples, singles can get
some value out of this well-worn strategy, too.
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