Social Security Q&A: Should Each Spouse File And Suspend, Claim Spousal Benefits And Then File For Retirement Benefits At 70?Commentary by Laurence Kotlikoff
September 01, 2014
Social Security may be your largest or one of your largest assets. How you manage it, by deciding which benefits to collect and when, can make an absolutely huge difference to your lifetime benefits. And those with the highest past covered earnings have the most to gain from maximizing their Social Security.
Today's question asks if it's best for both spouses to file and suspend, and for both to then claim spousal benefits on the other spouse's record before switching to their own retirement benefits at 70. The question brings up the related questions of when it's possible to file and suspend and potential effects of receiving the excess spousal benefit.
Question: My husband and I are both 64. At full retirement age, his benefit will be $2,336 and mine will be $2,082. Would our best Social Security strategy be for both of us to file and suspend and collect spousal benefits and then switch to our own benefits at age 70?
Answer: You can't file and suspend before reaching full retirement age, which is 66 in your cases. If you both file and suspend, you will both flip yourselves into the realm of excess spousal benefits as opposed to that of full spousal benefits. Once you file for a retirement benefit, even if you suspend it, your spousal benefit will then be calculated as an excess spousal benefit - the excess (the difference) between half your spouse's full retirement benefit and 100 percent of your full retirement benefit. This excess could well be negative, in which case your excess spousal benefit will be set to zero.
So if you both walk into the Social Security office at 66 and both file and suspend, you may both wipe out your spousal benefits right there on the spot. Let's not do this.
Instead, let's have the higher earner file and suspend, while the other does not file and suspend, but rather simply files just for her or his spousal benefit, which will now be calculated as the full spousal benefit, namely half of the other spouse's full retirement benefit.