Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details.
I get a lot (a LOT) of questions about the File and Suspend tactic for Social Security benefits, so I thought some more review would help. For the uninitiated, File and Suspend is a tactic that married couples can use to help maximize their total Social Security benefits. In this post I’ll try to cover some of the more common questions.
File and Suspend works like this: One of the two in the couple can file an application for Social Security benefits and then immediately suspend in order to not receive the benefits. This can allow the other spouse to utilize the first spouse’s record to receive a Spousal Benefit. Other eligible dependents (such as children under 18) can also receive benefits based upon the filed and suspended record.
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There are a few factors to note about File and Suspend:
- You must be at least at Full Retirement Age (FRA) to File and Suspend.
- Either spouse can File and Suspend, but not both. By Suspending, you are not eligible to receive a Spousal Benefit.
- If the non-Suspending spouse is under FRA and begins receiving Spousal Benefits, he or she will no longer be earning Delayed Retirement Credits (DRCs) on his or her own record. Plus both the Spousal Benefit and the “own” benefit of the non-suspending spouse will be permanently reduced by filing before FRA.
- The spouse that has not Filed and Suspended can receive Spousal Benefits based on the other spouse’s record at any age over 62 – but the amount of the benefit will be reduced if the spouse receiving Spousal Benefits is less than FRA. At FRA, the Spousal Benefit would be 50% of the filed and suspended worker’s Primary Insurance Amount.
Why File and Suspend?
The main reason for File and Suspend is to allow the Suspending spouse to delay receiving benefits, earning up to 8% in Delayed Retirement Credits (DRCs) per year. This will not only increase the amount of benefit that the Suspending spouse will receive when he or she files for benefits, but it will also increase the amount of Survivor Benefits for the other spouse. At the same time, the other spouse can be receiving Spousal Benefits based on the first spouse’s record.
Here’s an example: The husband has a PIA amount of $2,300, and his wife has a PIA amount of $1,500. The couple are both at FRA. The husband Files and Suspends, and the wife can immediately begin collecting a Spousal Benefit equal to 50% of the husband’s PIA – $1,150. At the same time, both spouses are accruing DRCs on each of their own records. Both of them can delay filing for benefits on his and her own record until age 70, at which point they will each have achieved the maximum benefit on their own records. When she reaches age 70, the wife will file for her own benefit and discontinue receiving the Spousal Benefit. The husband will also re-file at age 70.
Another example: The wife has a PIA amount of $2,000, and the husband has a PIA of $1,000. The wife is at FRA, and the husband is a year younger. When the husband reaches FRA, the wife could File and Suspend, and the husband can begin receiving a Spousal Benefit of 50% of the wife’s PIA, delaying filing for his own benefit in order to receive the DRCs.
The husband in the second example could choose to begin receiving Spousal Benefits before FRA. In that case though, he would not be eligible for DRCs. This is due to the rule that requires a “deemed filing” if you file for Spousal Benefits prior to FRA. A deemed filing is the same has having filed for your own benefit, and as such your benefit and the Spousal Benefit will be reduced, permanently, due to the early filing.
A third example: The husband has a PIA of $2,000 and the wife has a PIA of $500. The husband is two years younger than the wife, she is 66 (FRA) and he is 64. The wife has begun receiving her own benefit at FRA. Since the husband is not yet at FRA, File and Suspend is not available to him. However, once he reaches FRA, he can File and Suspend, and the wife can begin collecting a Spousal Benefit, increasing her own benefit to 50% of his PIA.
It’s important to note that for all of the examples, the spouse that is described as having Filed and Suspended could just as easily filed for his or her own benefit and begun receiving it immediately, rather than suspending. This would also enable the other spouse to begin receiving Spousal Benefits. The spouse that is collecting benefits on his or her own record would just no longer be accruing DRCs for his or her future benefit.
Sterling Raskie, MSFS, CFP®, ChFC®
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I am 64 and have enough credits to retire. I have children under 18.
1) If I wait till full retirement age (66) I can file and suspend and my children will receive benefits at that time.
2) If I file for benefits at age 65 and continue working, will my children start receiving benefits then, or do they have to wait till I am 66? Since I will be working
what happens when I reach 66? Will I be able suspend then?
Thanks
TFA
1) correct
2) your children will receive benefits based on your record, however, if you earn more than the annual limit ($14,640 in 2012) then you and your children may lose some of the benefits. For every $2 over the limit, $1 is withheld. This would be split between your benefit and your children’s benefits. Once you reach age 66, there is no longer an earnings limit, so this will not apply. In the year you will attain age 66 but before you actually reach your 66th birthday, the limit is $38,880. Above that amount (before age 66) you will give back $1 for every $3 in excess.
Hope this helps –
jb
I turn 65 in December. My wife will be 64 in December. I am under Windfall and I do have enough work credits. She does not plan on taking benefits until age 70 Question: Can I still obtain 1/2 of my wife’s benefits? Do I have to wait until I’m age 66 to get half of her benefits?
Jeffrey, in order for you to file for spousal benefits, your wife must file for her own benefit. Since she’s under Full Retirement Age, that would mean that she would receive a reduced benefit for her lifetime. Once she reaches Full Retirement Age (66) she can file and suspend her benefit, which would allow her to continue delaying receipt of the benefit until age 70 (when the amount is maximized). In addition, once she has filed and suspended you would then be eligible to receive the Spousal Benefit. Without knowing the specifics of your Windfall provision impact I can’t say for certain if you would receive 1/2 of her current (Full retirement age) benefit – but quite likely it would be reduced somewhat by the Windfall Elimination Provision or possibly the Government Pension Offset.
Hope this helps –
jb
From SSA website: “If a spouse is eligible for a retirement benefit based on his or her own earnings, and if that benefit is higher than the spousal benefit, then we pay the retirement benefit. Otherwise we pay the spousal benefit.”
This seems to mean that filing and suspending is useless for increasing the DRCs of the non-suspending spouse if the PIA of the non-suspending spouse is higher than the spousal benefit because the non-suspending spouse cannot receive DRCs if he or she is receiving the full retirement benefit. Maybe that is what SSA intended with this rule. Am I right?
Tom,
That particular provision only applies prior to Full Retirement Age. At Full Retirement Age, the individual can claim the Spousal Benefit alone, without claiming the retirement benefit (allowing it to increase by DRCs).
Hope this helps.
jb