More than 20% increase in Social Security checks – You should make this decision

Amelia Ross
6 Min Read

Social Security benefits are essential for many retirees, but did you know there’s a lesser-known strategy to increase these benefits by up to 24%? If you claimed your Social Security benefits early, you might have another chance to boost your monthly payments by suspending them at full retirement age. Let’s explore how this works and whether it could be a good option for you.

Understanding Social Security Benefits

When you first claim Social Security benefits, you lock in a base amount. People who delay claiming until age 70 can receive payments about 76% higher than those who start at age 62, the earliest eligibility age. However, after claiming, your income is mostly fixed, with increases only through the annual cost-of-living adjustment (COLA).

The Suspension Strategy

There is an exception that allows individuals who claimed early to suspend their benefits upon reaching full retirement age (66 to 67, depending on your birth date). By suspending your benefits, you can earn delayed retirement credits for each month of suspension, up to age 70. This strategy can increase your annual benefits by 8%, potentially boosting your payments by 24% over three years.

Is Suspending Benefits a Common Strategy?

This strategy isn’t widely used, and the Social Security Administration (SSA) doesn’t track how many people take advantage of it. Financial advisors like Leanna Devinney from Fidelity mention that it’s rare for clients to use the “file and suspend” approach after reaching full retirement age.

Changes in Social Security Regulations

In 2015, Congress tightened rules on a different file-and-suspend tactic. Previously, one spouse could claim spousal benefits while both accrued retirement credits. Now, this loophole has been closed.

Comparing Strategies: File and Withdraw vs. Suspension

The suspension strategy differs from the “file and withdraw” option, which lets individuals stop benefits within the first year of claiming and repay all received amounts to reapply for higher benefits later. This “do-over” option is better known but less used due to the financial burden of repaying benefits.

Advantages of Suspending Benefits

Suspending benefits until age 70 doesn’t offer larger checks than delaying the initial claim until 70. However, it can be beneficial for those who later realize they don’t need Social Security as early as they thought. Maybe you received an inheritance, found part-time work, or your financial situation improved, reducing your dependence on Social Security.

The Impact of Longevity

Retirees often gain a better understanding of their lifespan over time. For example, a healthy 65-year-old man can expect to live until 88, and a woman until 90. Delaying benefits not only increases monthly payments but also maximizes the compounding effects of COLA on a higher base benefit.

Benefits for Surviving Spouses

Suspending benefits can also help a surviving spouse. The longer the higher earner delays claiming until age 70, the larger the benefit the surviving spouse will receive. Survivor benefits can be 100% of the deceased spouse’s benefit once the survivor reaches full retirement age.

Flexible Decisions on Claiming Benefits

Claiming benefits at age 70 provides the highest monthly payments, but it doesn’t have to be an all-or-nothing decision. Each month you delay beyond age 62 increases your future benefits, whether through a full delay or a suspension after an early claim.

Frequently Asked Questions (FAQs)

1. What is the full retirement age for Social Security benefits?

Full retirement age varies between 66 and 67, depending on your birth date.

2. How much can benefits increase by suspending them?

Benefits can increase by 8% for each year of suspension, up to age 70, potentially totaling a 24% increase over three years.

3. Is it common to suspend Social Security benefits?

No, it’s not common. Many retirees are unaware of this option or prefer not to suspend benefits.

4. What is the “file and withdraw” option?

This option allows you to stop benefits within the first year of claiming and repay all received amounts to reapply for higher benefits later.

5. How can suspending benefits help a surviving spouse?

If the higher earner delays claiming until age 70, the surviving spouse can receive a larger benefit, equal to 100% of the deceased spouse’s benefit at full retirement age.

Suspending Social Security benefits can be a smart strategy for boosting your retirement income. It offers flexibility and can provide significant advantages, especially if your financial situation improves or you live longer than expected. Consider discussing this option with a financial advisor to see if it fits your retirement plan.

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