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Why Not File and Suspend?

A reader writes in, asking:

“I’ve read that if I file and suspend before April 30 of next year, then I will be treated under the old Social Security rules. For people who can file and suspend within this window, is it always a good idea to do so?”

First, let’s answer the question the reader did not actually ask. If you reach your full retirement age on or after 4/30/2016 (and are thus subject to the new rules regarding voluntary suspension) filing and immediately suspending will make no sense. For people subject to the new rules, suspension will only make sense as a way to essentially change your mind (i.e., you filed early, then later wish you had waited).

To answer the reader’s question, filing and suspending prior to 4/30/16 likely does make sense if:

  • You are eligible to do so (i.e., you reach your full retirement age prior to 4/30/16),
  • You want to delay your own retirement benefit until age 70, and
  • You are not planning on using the “restricted application” strategy yourself (i.e., you are not planning on collecting spousal benefits between your FRA and your age 70 while allowing your own retirement benefit to continue growing).

Doing so would give you the option to retroactively unsuspend later, at any point prior to age 70. This can be particularly helpful in the event that you suddenly learn that your life expectancy is shorter than you had initially thought.

Example: Barbara is unmarried. She files and suspends immediately at her FRA of 66. Then at age 68, she is diagnosed with a medical condition that indicates a dramatically reduced life expectancy. She chooses to retroactively unsuspend, going back to her FRA. As a result, she gets a lump-sum check for 24 months of benefits, and her monthly benefit going forward would be what it would have been if she had simply filed (and not suspended) at age 66.

Filing and suspending can also be helpful in that in some cases it can allow your spouse or child to receive benefits based on your work record while you allow your own retirement benefit to continue growing. (One of the requirements for your spouse or child to receive such benefits is that you must have filed for your own retirement benefit.)

When Filing and Suspending is a Bad Idea

To reiterate what was said above, if you’re married, there is one case in which you would definitely not want to file and suspend, even if you could do so before 4/30/16. Specifically, you should not file and suspend if you plan to use the restricted application strategy in order to receive spousal benefits between your FRA and your age 70 while allowing your own retirement benefit to continue growing. In such a case, filing and suspending will have either of two distinctly detrimental effects.

First, if your own primary insurance amount (PIA) is greater than 50% of your spouse’s PIA, filing and suspending would mean that you are no longer eligible for a spousal benefit at all. This is because of CFR 404.330(d), which states that if you are “entitled” to a retirement benefit and your PIA is greater than or equal to 50% of your spouse’s PIA, you are not eligible for a spousal benefit. And once you file for your retirement benefit, you become “entitled” to it, even if you suspend it.

Second, if your PIA is less than 50% of your spouse’s PIA, filing and suspending will still result in a smaller total monthly benefit than if you had not filed and suspended.

Example: Your PIA is $800. Your spouse’s PIA is $1,800. If you file a restricted application at your full retirement age, you’ll get a spousal benefit of $900 (i.e., 50% of your spouse’s PIA). If you instead file at your FRA for both retirement benefits and spousal benefits you will receive your retirement benefit of $800 and a spousal benefit of $100 (calculated as 50% of your spouse’s PIA, minus your PIA). But if you ask to have your retirement benefit suspended (i.e., you “file and suspend”) you’ll be left with just the $100 spousal benefit per month until you eventually unsuspend.

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