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Should I Suspend My Social Security Benefits?

By Matthew Frankel, CFP® - Updated Mar 14, 2018 at 1:15PM

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Suspending benefits can mean more money later, but it isn't the best move for everyone.

Although certain loopholes have been closed recently, there are still some good reasons you may want to suspend your Social Security benefits after you've reached full retirement age. Suspending benefits now means you'll get a higher benefit later, which could significantly boost your quality of life in retirement. Here's what you need to know about suspending Social Security benefits, and whether or not doing so might be a smart choice for you.

Suspending Social Security benefits can mean more money later
If you've reached your full Social Security retirement age but have not yet reached age 70, you can choose to suspend your retirement benefits until a later date.

Social Security card, $20 bill, and pair of glasses laying on top of tax return papers

Image source: Getty Images.

The primary motivation for doing so is to earn delayed retirement credits. As of this writing, a benefit increase of 8% per year will be given for each year benefits are suspended, or two-thirds of 1% per month. These delayed retirement credits can accumulate until as late as age 70, so suspending Social Security for a few years can be a smart way to boost your retirement income.

For example, let's say you're turning 66 this year (the current full retirement age), and that your monthly Social Security benefit is calculated to be $1,500 per month. By choosing to suspend your benefits for two years until you turn 68, your monthly checks will rise by 16% to $1,740 -- in addition to any cost-of-living increases that are given to Social Security recipients during those two years.

The spousal file-and-suspend strategy is going away
One popular strategy involving suspended Social Security benefits is known as "file-and-suspend." Basically, one member of a married couple files for Social Security benefits at full retirement age and immediately suspends them to collect 8% annual delayed retirement credits.

Unfortunately, the budget bill Congress passed in late 2015 eliminated this loophole, effective after April 30. Even if you're currently eligible to use this strategy, your application must be submitted by this date, or else this option will disappear forever.

If you file and suspend after April 30, then nobody will be allowed to draw benefits off your work record while your benefits are suspended. However, you can still file and suspend your own benefits to accumulate delayed retirement credits.

Who should suspend benefits?
It's important to realize that you'll (theoretically) get the same total amount of money from Social Security whether you start your benefits early, on time, or late. If you file early, you'll collect a lower benefit for more years, and if you wait, you'll get a higher payment, but for less time.

Having said that, there are a few situations where it makes sense to suspend benefits. For example, if you're still working full-time and don't really need the money yet, it might make sense to let your eventual retirement benefit continue to grow. Or, since Social Security is based on a 35-year average of your highest-earning years, continuing to work during the latter part of your career could boost your retirement benefit, on top of any delayed retirement credits. Finally, if you're in excellent health, or you have a family history of longevity, suspending your benefits could work out in your favor over time.

To sum it up, suspending your Social Security benefits could mean higher monthly payments for the rest of your life once you decide to start collecting again, but it's not for everyone. However, if any of the situations I mentioned earlier apply to you, suspending your benefits could be the right move.

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