Is It Smart to File and Suspend Social Security Benefits?
How and when you claim your social security benefits have a significant impact on your financial condition in retirement. It also affects how much social security benefits your family members may receive when you are alive and after you pass away.
You may have heard that the suspension of your social security check was a way to boost your total payments. While it was right at one point, the law has now changed.
However, you are lucky.
Well, it’s because there are some situations where it makes sense to suspend your benefits.
Here’s a little about the strategy, and the conditions where you can try implementing them.
More About the Filing and Suspending Strategy
The file-and-suspend strategy is most popular with married couples striving to maximize their social security benefits. It involves your filing for your social security check, and then immediately suspending the application.
According to the law then, the strategy lets your family member or spouse claim any amount they were eligible to receive through your employment record. By suspending your payments, you earn delayed retirement credits, which boost your monthly checks.
But according to law changes in 2016, your family members cannot claim their benefits if you file and suspend your retirement benefit.
The good news is that there are situations where it may be better for you if you file and suspend your services.
Your Decision Has Changed Because You Want Better Future Monthly Benefits
If you have changed your decision, you have only 12 months to withdraw your social security benefits application. And if you do withdraw your application, you will have to repay and return the benefits received within these 12 months.
Besides, you risk suspending your check if you withdraw and cancel your application after these 12 months.
However, you can earn delayed retirement credits if you suspend your social security check only upon reaching your full retirement age (FRA). These credits are useful if your benefits were reduced because yod applied early but now want a higher payout.
Supposing your FRA is 66 but you had to claim your benefits at 62, your monthly payment immediately reduces by 25%. However, if you later suspend your benefits at your FRA, you can receive an 8% increment in your monthly check for each year waiting.
And if you suspend and wait till 70, you earn as much as you would have earned if you had delayed and claimed benefits at your FRA.
You are expecting more income in the year and want to avoid taxing your benefits
You can also suspend your check if your alternate income source unexpectedly increases, and a portion of your check gets taxed. Potential alternate income source for retirees is a part-time job or taxable distributions from retirement accounts like 401(k).
Some of your social security may be taxed if you are single, and your alternate income and half your benefits are more than $25,000. The limit is $32,000 in the case of married or joint filers.
However, you can suspend benefits only if you expect a higher income year after your FRA. You don’t have any viable alternatives if your high-income year falls before your FRA.
While rules have changed, there are indeed some situations where you can opt to suspend your social security benefits. But remember that if your retirement benefits get suspended you stand to lose your eligibility to receive any form of Supplemental Security Income.
Don’t worry if you are in a dilemma about suspending your social security benefits.
You can always turn to your social security benefits lawyer in Glendale for proper help and guidance.