Normally, in planning when to apply for social security benefits, it makes sense (assuming you expect to live a long time) to delay applying. However, for some married couples, the "file and suspend" strategy results in greater benefits, even though it runs somewhat counter to the normal strategy. According to the Social Security Administration,
If you and your current spouse are full retirement age, one of you can apply for retirement benefits now and have the payments suspended, while the other applies only for spouse's benefits. This strategy allows both of you to delay receiving retirement benefits on your own records so you can get delayed retirement credits.The practical effect of this technique is explained by the AARP in the following example:
John and Mary, a married couple... are 66, which is their full retirement age. Mary is retired; John plans to keep working until he is 70.
At 66, John, who had a bigger income than Mary over the course of his career, files for his full retirement benefits of $2,000 a month, but immediately suspends payment. By doing that, he will begin accruing delayed retirement credits: For each year that he keeps his payments in suspension, they'll be 8 percent higher when he does take them. The credits top out at age 70. Since John's basic retirement benefit at age 66 was $2,000, his new payment if he waits until 70 to collect will be about $2,640, plus any cost-of-living increases.
When John filed for his benefits, he automatically activated Mary's ability to apply for a spousal benefit... equal to up to one-half of the other spouse's retirement benefit. So Mary can collect $1,000 a month [without even] taking her own retirement benefit...
This means that the couple in this example receives $12,000 per year without receiving any retirement benefits on their own record, which they will start doing at a later date. This is an example of how the wrong strategy for collecting social security benefits can mean the receiving tens of thousands of dollars less than would otherwise be possible. Just as an attorney should be consulted for estate planning or other legal questions, a financial planner with social security expertise should be consulted when planning for retirement.
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