Tuesday, July 15, 2014
Like tax loopholes, Social Security benefits are not palpable and require knowledge, familiarity, and understanding of intricate rules and regulations. There are various tactics that can be used to maximize Social Security retirement benefits. For example, one of the most popular strategies is the file-and-suspend strategy. This strategy has been touted for years as a way for married individuals to maximize their benefits as a couple.
For those unfamiliar with the strategy, it allows a couple at full retirement age to increase each individual’s worker’s benefit by 8% annual delayed retirement credits for each year that the benefit start date is deferred until age 70—while triggering a spousal benefit for one individual. This is accomplished when one of the spouses applies for their worker’s benefit and subsequently files a notice to suspend payment of benefits. This permits the other spouse to file for their spousal benefit which will equal 50% of the filing and suspending spouse’s benefit.
It is also possible for single individuals to take advantage of the file-and-suspend strategy. The benefit of filing and suspending retirement benefits if you are single is that it enables you to go back to the Social Security Administration before age 70 to request payment of a retroactive lump sum of monthly benefits that you would have received had you started collecting benefits when you reached full retirement age. The key is to be aware of strategies that will work in your situation and to implement them in a timely manner.
See Robert Klein, Social Security Loophhole’s Huge Windfall Opportunity, Market Watch, July 10, 2014.