File and Suspend

What is 'File and Suspend'

File and suspend was a Social Security claiming strategy that allowed married couples of full retirement age to receive spousal benefits and delay retirement credits at the same time. It was ended as of May 1, 2016, by the Bipartisan Budget Act of 2015, signed on November 2, 2015, by President Obama.

BREAKING DOWN 'File and Suspend'

In our current Social Security system, a spouse can only claim spousal benefits when the main beneficiary (the higher-earning spouse) claims them first. The "file and suspend" strategy allowed the beneficiary to file for benefits, but then delay receiving those benefits until a date in the future. When this happened, it permitted his or her spouse to file for – and start receiving – spousal benefits. Meanwhile, the main beneficiary's retirement benefits would continue to grow the longer they were pushed into the future. 

Why File and Suspend?

When a couple filed and suspended, spousal benefits kicked in immediately. Spousal benefits are half of the income of the higher-earning spouse, so they're often more valuable than the benefits the spouse would receive otherwise.

Meanwhile, the delayed retirement credits grew more valuable with each year, and the monthly payout would be much larger once they were finally redeemed. Retirement benefits grow by 8% of the original amount for each year they're deferred. This means that if a person delays retirement benefits until the age of 69 (three years past the current retirement age of 66), he or she will receive a monthly benefit 24% higher than what it would have been had he or she retired at age 66 (8% for each year deferred).

Retirement benefits cannot increase past the age of 70. Also, note that the full retirement age is on a graduating scale, and it differs depending on the year a person was born. The retirement age for the current generation of retirees is 66, but those just a few years younger reach full retirement age at 67.