Maximizing Social Security Retirement and Disability Benefits Part Two

Methods to Maximize Social Security Disability and Retirement Benefits

Part Two: Is File and Suspend a Closing Loop Hole or a Strategy for All?

This the second post in my three-part series on social security retirement strategies to increase your benefits. In this post, I will be discussing the future of the "file and suspend" loophole and who might benefit from this strategy while it lasts. I have previously discussed how the file and suspend strategy can be used to increase retirement benefits for retired couples. In my next post I will explain how workers considering early retirement might maximize benefits by applying for both social security retirement and disability benefits.

While our first article explained the"file and suspend" strategy for increasing retirement disability benefits for retired couples, this article aims to provide you with some information to help you determine if it might be something you want to discuss with your financial adviser.

There is disagreement as to whether or not the "file and suspend" strategy is a method of "gaming" the social security system, or whether it is simply smart financial planning. The Obama administration has made its opinion clear; it considers this strategy a loophole for the wealthy and as a result, it may soon be shut down because of the added cost it imposes on the social security program.

Not everyone agrees. While it is true this strategy undoubtedly results in additional payment of benefits through the social security retirement program, the jury is out on whether file and suspend is relevant only to the wealthy. The fact is, delayed claiming strategies - of any sort- may actually benefit lower income households the most since they are most reliant on social security benefits as a source of income replacement after retirement.

Is this a strategy or loophole? Well, that depends on how you look at things; for now, it’s completely legal. This strategy was approved by the United States Congress and signed into law by President Clinton as part of the Senior Citizens Freedom to Work Act of 2000. The strategy behind this statutory framework was to create an incentive for employees to work longer by allowing them to work and receive full social security benefits even after they reached their full retirement age.

So far, a majority of the people taking advantage of the file and suspend have been those who can afford to postpone taking full payment of benefits and who can have at least one spouse wants to and can continue to work past full retirement age. It is on this basis that the perception has developed that this strategy is only for the wealthy. Indeed, a study by the Center for Retirement Research at Boston College found that 46% of the file and suspend benefit flows to the top 40% of households, measured by wealth.

These statistics only tell us that those taking advantage of the strategy tend to be wealthy, and that is not surprising as the wealthy tend to have better access to sophisticated financial advisers than the rest of us. These statistics don’t tell us who COULD take advantage of file and suspend.  The truth is, anyone who is married and can afford to postpone taking social security benefits, even for a short time, may find they will benefit from this strategy.

In part three of my series on social security disability retirement strategies, I will review ways to receive full benefits even if you retire before full retirement age.