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Most Social Security filing strategies are focused on married folks, or those who have been married and are now divorced or widowed. Single folks who have never been married seem to get short shrift – but it’s not because the decisions are any less important. The reason Social Security filing strategies for the single person are not often reviewed is because there are very few things that can be done strategically for the single person’s Social Security filing.
We’ll go over the primary options for a single person below.
Delaying
In order to increase your Social Security benefit amount, you can always delay your filing. If your Full Retirement Age is 66 for example, delaying filing from age 62 to age 63 will result in an increase of your benefits of 5%. Delaying from age 63 to 64 will net an increase of 6 2/3%, as will delaying each year beyond age 63 up to your Full Retirement Age.
Delaying beyond Full Retirement Age provides increase to your benefits as well. For each year that you delay after Full Retirement Age your benefit will increase by 8%. If your Full Retirement Age is 66, that could be a total of 32% increase over your Full Retirement Age benefit by delaying to age 70.
Continuing Work
When you reach age 62 you have the option of beginning to receive your Social Security benefit. At that age, the benefit will be reduced, by as much as 30% if your Full Retirement Age is 67 (25% if FRA is age 66). However, if you’re still working, you may be in a position to increase your projected Social Security benefit if your current earnings are greater than the indexed earnings from the years earlier in your career. When later earnings are greater than your earlier earnings (indexed) these greater earnings replace the lower earnings, thereby increasing the average lifetime indexed earnings that is used to calculate your benefit.
So – if in an earlier year your earnings were indexed as $20,000 per year and you’re now (at age 62) earning $25,000 per year, your current year’s earnings will replace the lower earnings from earlier, increasing your average lifetime earnings. When your benefit is re-calculated, there will be an increase to the projected benefit due to the increased lifetime earnings.
In addition, if you’re still working it may not make sense to file for your Social Security benefit since there is a limit to the amount of money you can earn while receiving benefits if you’re under your Full Retirement Age (FRA). In 2015 the earnings limit is $15,720 per year before the year you reach Full Retirement Age. Above that limit, $1 is withheld for every $2 you’ve earned above the annual limit. So if your earnings are significant, you’ll be giving back most of your benefit anyhow.
File & Suspend
Usually when we discuss the concept of File & Suspend we’re talking about married (or previously married) folks. File & Suspend can be beneficial as a Social Security filing strategy for single folks as well, in a couple of cases.
File & Suspend, briefly, is the situation where the individual files for Social Security benefits and then immediately suspends receipt of those benefits, delaying filing until some later age.
First of all, the act of File & Suspend provides the single person with an option to change his or her mind later and receive Social Security benefits retroactively to the date that the original File & Suspend was enacted. Then he or she would continue receiving benefits from that point on as if the filing date was never suspended. This can be useful in the case where the individual intended to delay filing to age 70 (for example) but circumstances have changed and now he or she would like to receive the benefits earlier. Note: this retroactive benefit option has been eliminated as of April 29, 2016. It is no longer possible to suspend benefits and change your mind for retroactive benefits.
For example, Tom, who has never been married, has a benefit available to him at his FRA of $2,000 per month. He decides to File & Suspend his benefit at age 66 (his Full Retirement Age), intending to delay the benefits to his age 70. At that point his benefit would have grown to $2,640 per month.
Unfortunately Tom falls upon hard times during his 68th year. He really could use some extra money right now, as he has high blood pressure and is no longer eligible for his truck driver’s license, so he’s unable to work.
Tom could file for his Social Security benefits now at age 68, and he’d receive a benefit of approximately $2,320 per month (plus Cost-Of-Living Adjustments). On the other hand though, since Tom did a File & Suspend at age 66, he could retroactively receive two years’ worth of benefits, for a total of $48,000 in a lump sum. Then he would continue to receive a monthly benefit of $2,000 (plus COLAs) from this point forward.
Dependent’s Benefits
The other reason that a single person might File & Suspend is to provide benefits for a dependent while still delaying receipt of his own benefits to some later age. This is exactly the same as the reason a married person might File & Suspend his or her benefits, but there’s no spousal benefits involved.
So Tom from our example above has two young children ages 2 and 7 with his live-in girlfriend Ruth. Tom provides more than 50% of the support for the kids. When he files for his Social Security benefit, the children are eligible for dependent’s benefits based upon his Social Security record. By enacting a File & Suspend, Tom can continue to delay his own Social Security benefit while at the same time providing dependent’s benefits for the children.
Sterling Raskie, MSFS, CFP®, ChFC®
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.
You quoted “In 2015 the earnings limit is $15,720 per year before the year you reach Full Retirement Age. Does this include retirement income?
Thanks,
Shirley H
Shirley –
Retirement income is not included when determining if the earnings limit has been reached. Only earned income (W2 employment or self employment) is used.
jb
In your example in the last paragraph; doesn’t Tom need to be married to Ruth for her to receive a spousal benefit?
to Don: I was thinking maybe because Tom is the legally liable relative dependent wise for the children; maybe this is why he can claim spousal benefits.
If the children are Tom’s dependent; they must live with Tom “part of the year”;.
I know this because My Father’s Attorney. “may have claimed me as my Father’s dependent illegally; because the last time I lived with my Parents was 1974 !!! thank you; Anne
You’re right, Don. Since they were never married, Ruth is not eligible for child-in-care benefits based on Tom’s record. I’ve updated the article to remove that portion. Nice catch!
jb
Summary: I did not know I could earn Social Security Work Credits past age 65 y.
This is a “whole new world”; I would not have known this if not for “Financial Ducks!
Thanks Blankenship Financial !!! I hope to get Financial advice in the future! AR 51
Glad to hear you are getting a benefit from the article, Anne.
“A whole new world: Jim”; “the difference between a life of financial woes v. a Life of Financial Wealth; “I can not thank you enough !!!; I will keep you updated; ps I listened to the audio again; I will re-post to friends + family!!! :)
ps Was the intro musical theme in your “Social Security Strategies” “The Moody Blues” theme? the theme sounded familiar; I look forward to “buying your books” when I am more “set financially”; thanks again! AR
I don’t think it was Moody Blues – that was something prepared specifically for us. I can see where you’d think it was Moody Blues though! :)
Thanks;: a nice (moody blues type) crescendo:) ; You could save people a fortune over their lifetimes with your strategies; I have learned a lot about Finances; a very important topic !!! Have a great day !!! AR Snowy CT :)
Hi Jim:
As a matter of coincidence; when I do “file a lawsuit to re-claim my Inheritances”; the presiding Judge is 91 years old (Senior Judge – Conn.) !!!
The Judge did not begin his second career until the Judge was 70 years old!!!
The Judge has been “employed from age 70 until age 91 to this very day!!
So how do you think the Judge will feel when I tell the Judge my “troubles are I am being told I am too old to work and begin a career at the age of 63 ?”
(I was a former nanny)@
I predict the Judge will grant me a New Trustee the very day of my Court Case !
(March-June2015) I will keep you updated and thanks oh so much for the SSA info!
Anne Rockwell Connecticut 1951 (not the author; another Anne Rockwell) thanku!!!
Then after you “file and suspend”; because you may have filed too early; you can “re-file I suppose(to get a better “return”; very good information; thank-you!:)
how do i file and suspend social security as a single person
You would simply file an application and then voluntarily suspend receipt of benefits. I believe this can be done via the online application.
Hi Jim @ Getting Your Financial Ducks in a Row:
Happy New Year ! and thanks for this most excellent broadcast; amazing how you explain Social Security regulations in a easy to understand manner: I always feel better after I read or listen to your articles. My situation is: I thought maybe my “savings (inherited trust)” would be adequate; however: I think striving for Social Security funds as I age is an integral financial back up plan;
So I was thinking about using monies in my “trust”; then “earning SSA Credits”; then filing sometime around age 70; at which time my funds may be “diminished”; due to ordinary living expenses; so I always have a SSA check as a “safety net”;
I like your example of Jane: you say under your strategy Jane (or me) would result collect about $2,000 a month; (if she follows your formula) this $2,000 a month may not seem like much however for someone like me; an extra $2,000 month pay:
1. Auto Insurance
2. Auto taxes
3. Mortgage and taxes
This could give me the peace of mind of being free and living independently…All in all I would say “Social Security Benefits” may be misunderstood and underutilized;
However thanks to people like you Jim: I can plan my financial future positively. So I thank you very much. I now see my Lifetime’s Financial Plan in a better light !
Conclusion: There is not any reason why I, Anne; should not go forward with my business and continue to strive for SSA Benefits before I reach age 70; so when I do “age”; I will have a SSA check; which is always dependable and on time. Anne
Summary: I am not listening any more to people who tell me I “am too old (63 yo); to begin earning money and collect SSA Retirement checks before age 70+”; I now see the correct road which is my right to “be employed or begin a home business”!!
I will be filing for a new Trustee so I can follow the correct path explained by the SSA; I know an FDIC Bank Trustee will follow Social Security Regulations…
Thanks again !!! I will be forwarding your audio to my brother who is almost 60 y.)
This audio could also set my brother in the right financial direction…Anne Rockwell
(Posting to Facebook)