Social Security is an essential part of most people's retirement plans. But figuring out how to make the most of Social Security is extremely complicated. To maximize your benefits, it's important to know about innovative strategies designed to take advantage of the Social Security laws.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the file-and-suspend strategy for Social Security. He gives a simple overview of the strategy, noting that under file and suspend, one spouse files for Social Security benefits but immediately suspends them, instead waiting until a future date to start actually collecting benefits. The reason to do this is to allow the other spouse to claim benefits based on the first spouse's work history.
Dan then moves on to discuss the benefits of the file-and-suspend strategy. Filing and suspending allows a couple to earn some income now while also letting the higher earner's eventual benefit grow. That's especially useful when the second spouse has little or no work history and therefore would have few benefits if the second spouse filed based on his or her own earnings record. The strategy can also maximize survivors' benefits after the first spouse passes away.
Dan concludes with a warning about optimal timing for the strategy. Under the right circumstances, though, file and suspend can be a smart Social Security choice for couples.
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