Column: Simple Social Security planning can add extra cushion in retirement


Commentary by Joel Harris 

Social Security will undoubtedly play a major role in most Americans’ retirement income planning.

The problem is, most Americans will not take the time to understand various claiming strategies that could potentially add several thousands of dollars in additional benefits during their lifetimes. I’m going to discuss a little-used strategy called “file and suspend” that could potentially mean greater benefits to your retirement income.

Here’s the scenario: Joe and Jane Doe have been married for more than 30 years and are seriously considering retirement in the next five years. Joe is 65 and was born in 1949, which means his full retirement age is 66. Jane is 63 and was born in 1951, so her full retirement age is also 66. As with many Americans, Joe and Jane’s number one goal is finding ways to maximize their income when the checks stop coming in from their current employers.

Based on Joe’s working history, his primary insurance amount at full retirement age is $2,450. Jane’s, on the other hand, is $1,590 based on her earnings history. Joe plans on working past his full retirement age because he will “go crazy” if he stops working in his 60s. Jane has a different mindset and is dead set on retiring at 66 so she can travel, volunteer in her community and pick up new hobbies.

Most people in this scenario would elect to take their own benefits at 66, and by doing so, would leave a lot of future income on the table in retirement. Here’s where the “file and suspend” strategy could potentially work perfect for Joe and Jane.

Since Joe plans on working well past his full retirement age, he decides to file and suspend his benefits at 68, which makes Jane eligible for spousal benefits at 66. Jane would file a restricted application for spousal benefits only in the estimated amount of $1,225 at age 66. Next, Joe would elect to turn on his benefits at 70 based on his earning history, which has grown to approximately $3,234 per month. Since Jane elected spousal benefits at 66, her own benefit continued to grow until age 70, which is estimated to be about $2,099 per month in 2021. Lastly, in the event Joe passes away before Jane, she has the ability to switch again to survivor benefits in the estimated amount of $3,234 per month.

There are a lot of moving parts with the above-mentioned scenario. To put it in a nutshell, if Joe lives to be 85 and Jane lives to 90, they will receive approximately $1,242,087 in benefits using the “file and suspend” strategy versus an approximate $1,090,350 had they elected to take their own benefits at full retirement age.

That is a difference of $151,737; that is a lot of dough, folks!

The moral of this story is simple. Social Security income will have a profound effect on your retirement income planning. Please research all of your options before you go sprinting to the Social Security office to sign up for benefits at 62.