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File, Suspend Gets Spouses Most SSA Benefits

NEW BERLIN, Ill. ( TheStreet) -- You may have heard of the file and suspend tactic for Social Security, but do you know how it works? Or for that matter, why it is important?

Any worker can establish a benefit amount by applying at any time after full retirement age -- but he or she doesn't have to continue getting that benefit. The worker can immediately suspend the receipt of benefits, which may seem crazy but actually builds a "base" for the worker's spouse to begin getting benefits based upon that amount.

Here's an example:

A woman is at full retirement age and her spouse is the same age. Since the spouse of the worker has a much lower benefit available based on his own record, he is looking forward to using his wife's earnings record to get a spousal benefit, which can be as much as 50% of his wife's benefit.
Delaying receipt of a higher-earning spouse's Social Security benefit can reap rewards for the couple.

At the same time, the couple is hoping to delay getting the wife's benefit as long as possible, to her age 70, to get the maximum benefit from increases resulting from the delay. To achieve both goals, the wife applies for benefits at her full retirement age, then immediately suspends the benefit. This establishes the amount her husband can begin getting in spousal benefits while allowing the primary wage-earning spouse's record to keep rising in value until she reaches age 70, the maximum age to delay.

Keep in mind, the roles could be reversed -- the husband could be the higher wage earner and the wife could be the one applying for the spousal benefit.

The mechanics of this option did not become available until 2000, and Social Security Administration personnel are sometimes not familiar with it. It is still not available for online application, as are most other benefit options, so you need to visit or call your local SSA office to complete the process.

To ensure SSA personnel are clear about what you're doing, you might want to download the Social Security Legislative Bulletin 106-20 (available at this link), which explains the provision fully. The provision is part of the Senior Citizens' Freedom to Work Act of 2000; the third bullet point of the bulletin is what you want to point out as proof you can pull this number.

Since file and suspend is becoming more common, most SSA personnel are familiar with the tactic, so it shouldn't be a big deal to get the process under way. Follow this link if you need more information on how the benefit is calculated and how it works.

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