One More File and Suspend Option

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We’ve discussed the file and suspend option in multiple articles, but did you know that there is one more option for file and suspend. This is one that provides you with the opportunity to earn delayed retirement credits (DRCs) on your Social Security benefits, even if you started receiving benefits early.

File and suspend is generally an option that is used by a married couple – providing a method by which one of the two can receive Spousal Benefits while the other delays receiving benefits until later, earning DRCs.  (For more on this, see this article on Spousal Benefits.)

This additional option is available at Full Retirement Age (FRA), just like otherwise.  But what’s different about this is that the suspend option is used when you’ve already been receiving benefits, most likely early at a reduced rate, and by suspending at FRA you make yourself eligible to earn Delayed Retirement Credits (DRCs) on your present benefit.

Here’s how it works: Say you started receiving your benefit early, at age 62.  By doing so you permanently reduced your benefit.  If you’d waited until Full Retirement Age (FRA), you could have received a benefit of $2,000, but by taking the benefit early you are now receiving a reduced amount, $1,500.  And ever since that time, you have been kicking yourself because you had plenty of money to keep you going, and you wished you had waited and delayed your benefit.

Without overcomplicating this with Cost-of-Living Adjustments (COLAs), let’s say you’ve now reached Full Retirement Age (FRA).  Having reached FRA, you now have the option to enact the file and suspend option.  This means that you can now suspend receiving your benefit and begin earning Delayed Retirement Credits of 8% per year, between now and your 70th birthday.  This means that your overall benefit could be increased by as much as 32%, to a total of $1,980.  This could be a way to bump up your future benefits, as well as your surviving spouse’s Survivor Benefit.

In the event that you try to put this one into action, expect for some opposition from Social Security staff.  Even in the most-accepted of circumstances, Social Security staff often claim to know nothing of the file and suspend option.  So one way to help yourself in talking to the representatives is to refer to the webpage at http://www.socialsecurity.gov/retire2/suspend.htm.  I’ve copied the text below for your reference:

Voluntary Suspension of Retirement Benefits

If you have reached full retirement age, but are not yet age 70, you can ask us to suspend retirement benefit payments.

• If you apply for benefits and we have not yet made a determination that you are entitled, you may voluntarily suspend benefits for any month for which you have not received a payment. Your request to suspend benefits may include any retroactive benefits that might be due.
• If you are already entitled to benefits, you may voluntarily suspend current or future retirement benefit payments up to age 70 beginning the month after the month when you made the request.Reminder: We pay Social Security benefits the month after they are due. If you contact us in June and request that we suspend benefits, you will still receive your June benefit payment in July.

You do not have to sign your request to suspend benefit payments. You may ask us orally or in writing.

Note: If you started receiving Social Security benefits less than 12 months ago and you changed your mind about when they should start, you may be able to withdraw your Social Security claim and re-apply at a future date. If your request is approved, you must repay all the benefits you and your family received based on your retirement application.

 

Before you make your decision

There are some things you need to know about what will happen if you suspend your retirement benefits.

• If you are enrolled in Medicare Part B (Supplementary Medical Insurance), you will be billed by the Centers for Medicare & Medicaid Services (CMS) for future Part B premiums.These premiums cannot be deducted from your suspended retirement benefits. If you do not pay the premiums timely, you may lose your Part B Medicare coverage. (You will have the option of automatically paying the bill from an account at your bank or financial institution.)Exception: If you also receive benefits as a spouse or ex-spouse, we can deduct your Part B premium from that benefit payment.

• If you also receive Supplemental Security Income (SSI) benefits, suspending your retirement benefits will make you ineligible for SSI.