Social Security is a major source of income for most retirees and, on average, they depend on their benefit for about 36 percent of their income in retirement. Many people don’t realize that you may be able to collect more by taking advantage of spousal benefits and using social strategies such as “file and suspend” that can help you and your spouse maximize your lifetime benefits by timing when you claim. You can click here to see a free webinar on maximizing social security benefits.
In this series, I will write in-depth about these strategies. It is important to understand that factors such as taxes, life expectancy, retirement assets, family status and income all affect Social Security claiming strategies, so it’s important to consider your financial situation holistically when making decisions.
A spouse may collect spousal benefits if the primary worker in the family is still alive and has applied for Social Security benefits. The spouse has to be least 62 and will collect 32-49.9 percent of the full benefit of the primary worker. If the spouse is at full retirement age, he or she can collect 50 percent of the full benefit. Many people don’t realize they can collect these benefits and are leaving money on the table!
If you are divorced, you are able to claim spousal benefits if your ex qualifies for benefits, the marriage lasted at least 10 years and you have not remarried. When you do, your ex doesn’t have to know and it will not affect your ex’s benefits.
You can’t collect both your own worker’s benefit and a spousal benefit, because SSA simply tacks on the difference between the two. So, if your personal benefit is $1,000 and your spousal benefit is $1,200, SSA will pay you your personal worker’s benefit of $1,000 plus the extra $200.
File and Suspend
You can use a strategy called “file and suspend” to maximize your lifetime joint benefits by timing when you claim. It becomes very beneficial when a working or higher-earning spouse is at full retirement age. This strategy enables half of the couple to start collecting spousal benefits, while the higher-wage earner allows his or her benefit to continue to accumulate.
For example, Arthur is the higher earner, is at his full retirement age of 66 and his benefit amount is $2,000 a month. He files a claim for his Social Security benefits, and immediately suspends that claim so that his benefits continue to accrue at 8 percent a year until he reaches 70. Since Arthur already has filed for benefits, Joann becomes eligible for spousal benefits and starts claiming them, which amounts to $1,000 a month. These spousal benefits do not accrue additional credits.
At age 70, Arthur files for his own benefits, which have grown to 132 percent of his basic benefit, plus any cost-of-living increases. This strategy gives the couple an additional $1,000 in income per month, while increasing Arthur’s benefit and increasing Joann’s survivor benefit, which will be 100 percent of what Arthur starts collecting at age 70!
While file and suspend can be implemented before full retirement age, the benefits of the strategy may be significantly reduced. Part 2 will cover some more advanced Social Security strategies.
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