How would Americans who are not married, benefit from suspending their monthly retirement benefits after filing for Social Security at their Full Retirement Age (FRA)?
The biggest reason why a single person might want to do this is to benefit from the 8% annual delayed retirement credits until they reach age 70. This will give them up to a 32% boost in lifetime SS income. Plus when COLA’s (cost of living adjustments) are applied, the actual monthly income grows faster on a larger check than it does a smaller one.
But there’s ANOTHER reason to consider this.
Yes, many folks think that the file and suspend strategy is really meant for just married couples. However, single individuals who intend to delay benefits — and earn those 8% delayed credits — would benefit from filing at FRA and then suspending as well. How might that work?
A single filer who plans to delay benefits by using this strategy gets an important but little-known option that could potentially become beneficial in the future, yet it doesn’t harm them in the slightest along the way. What is that extra option?
By implementing a file and suspend strategy, the single filer now has the ability to earn delayed credits, but if life changes (say unexpected health issues come up or a need for a bunch of cash) the single filer can go back to the Social Security Administration and get a LUMP SUM payout from the time of the original filing.
Here’s an example if one’s full retirement age benefit was $2,000 a month, and they used the file and suspend strategy at that time (age 66). Perhaps 3 years later, they have a medical issue that makes it unlikely that they will live the long life they had anticipated.
So they could request a lump sum payment from the SSA for those 36 months of suspended benefits, or roughly $72,000 (plus COLAs).
Future Social Security benefits will be limited to the benefit amount at the time of filing (FRA benefits) – $2,000/month in this example plus COLAs). However, this is now an option should the need arise that otherwise the worker would not have had if the single filer had not executed a file and suspend strategy.
Now a married person could use the same strategy (get a lump sum) but that may not make sense (each situation is unique) since the spouse would receive the lower amount of monthly benefits when the spouse taking the lump sum dies.
If you are single, divorced, widowed… and especially if you are married, you can learn more about Social Security filing benefits in my book which can be found on another page on this website.
all the best… Mark