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 Nov. 2, 2015, by President Obama, and so is no longer a viable strategy.
- File and suspend was a social security maximization strategy that allowed married couples to receive spousal benefits and delay retirement credits.
- The idea was that lower-earning spouses could receive spousal benefits while delaying their own full retirement.
- New laws passed in 2015 largely eliminated this strategy by stating that retirement benefits cannot increase past the age of 70.
Understanding File and Suspend
File and suspend was a strategy that enabled the lower-earning spouse to start receiving spousal benefits, even though the higher-earning spouse had only filed for, but not started receiving, full retirement benefits. It was a method for a couple to benefit from the spousal benefit rule without having to miss out on the advantage of delaying full retirement beyond the current age of 66 or 67 (depending on when a person was born).
In our current Social Security system, a spouse can only claim spousal benefits when the main beneficiary (the higher-earning spouse) has already claimed them first. The defunct "file and suspend" strategy allowed the beneficiary to file for full 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 immediately, despite the fact that the beneficiary had technically not retired yet. As a result, 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 used the file and suspend strategy, 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), they will receive a monthly benefit 24% higher than what it would have been if they had 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.