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Social Security -- File and Suspend For Single Retirees?

Social Security -- File and Suspend For Single Retirees?

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This article was posted September 1, 2015.

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A few months ago I came across this article by financial planner Michael Kitces outlining the benefits of a Social Security "file & suspend" strategy for single retirees.

Why Individuals Should File And Suspend Their Social Security Benefits Reinstatement Of Voluntary Suspension Versus Retroactive Benefits

Many people are familiar with the "file & suspend" strategy for married couples where the higher earning spouse files for Social Security benefits and immediately suspends payment of those benefits. This allows the lower earning spouse to immediately claim 50% of the higher earning spouse's benefit while the higher earning spouse's benefit remains untouched and continues to grow until age 70.

A single person can do the same file & suspend strategy, but with no spouse to game the system and collect the 50% of the monthly benefit, why bother? The answer is, "What if you get sick?"

The decision to delay your Social Security benefits to age 70 largely rests on your view of your mortality. If you think the odds are good you'll live into your 80's or 90's delaying benefits makes financial sense. If you expect to die at the median life expectancy or less, taking benefits early is the rational choice.

For a single person, the "file & suspend" strategy gives you the opportunity to do a big "do-over" if you get sick.

For example, you decide the delay your Social Security benefits to age 70 and "file & suspend" your benefits at full retirement age (age 66 for people born in 1943-1954). Then out of the blue at age 69 you get a diagnoses of cancer with the proverbial "6 months to live". With the file & suspend strategy you'd have two choices (we'll assume your benefit at full retirement age was $1000/month.)

1) Take a benefit of about $1,260 for the remaining months of your life, or

2) Request that your original benefit of $1,000/month be reinstated and get the last 3 years of benefits ($36,000 plus inflation) paid to you in a lump sum. You would then only get a $1,000/month benefit for the remaining months of your life.

Obviously, the second choice would be preferable for our stricken retiree.

It doesn't cost you anything to "file & suspend".

To be sure, very few retirees are in the financial position to delay benefits to age 70. And of that group, fewer still will get some grave illness where it makes financial sense to reinstate their orginal benefit and collect the lump sum. But it's cheap insurance that costs you nothing to implement, so why not?

Resources for more information

Retirement Planner: Suspending Retirement Benefit Payments -- Social Security Administration information on the "file & suspend" process..

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Copyright 2015 John P. Greaney, All rights reserved.

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