Last week, I gave a simple example of how Social Security benefits work. Today I’ll explain the Social Security claiming strategy that many couples have used to increased their combined Social Security benefit. The strategy has 2 parts: Part 1 is called File & Suspend and Part 2 is called Restricted Application for Spousal Benefits.
File & Suspend must happen first. In my previous example, Wife was only allowed to take that extra spousal benefit because Husband started taking his personal benefit already. He took it at age 66, giving up the 8% growth that he could’ve gotten on his benefit each year he waited till age 70. With the file & suspend strategy, Husband does NOT need to start taking his benefit in order for Wife to start taking a spousal benefit. All Husband would have to do is call the Social Security office and tell them that he wants to file and immediately suspend his benefit so that his wife can start taking a spousal benefit. Once this step is done, Wife can now do step 2, which is call the Social Security office and tell them she would like to file for a restricted application for spousal benefits.
Like the previous example, she now gets to collect a spousal benefit (half of Husband’s personal benefit), while continuing to delay her own benefit and earning that 8% growth each year.
When Husband turns 70, he has delayed taking his benefit as long as Social Security will allow and will start taking his now increased benefit. When Wife turns 70, she will switch from taking her spousal benefit to taking her own (also increased) benefit. Together, they will each be collecting their maximum benefit in addition to having collected a spousal benefit for 4 years.
Sadly, this strategy will go away starting April 29th of this year (2016) with only a handful of exceptions. Come back next week to find out who gets grandfathered in and what steps they’ll need to take before the April deadline to secure this benefit!