Suspending your retirement benefits means exactly that – it involves requesting a temporary break from receiving your monthly payouts. But because it’s Social Security, there are certain rules that you need to follow and financial implications that you need to prepare for.
In this retirement planning guide, InvestmentNews discusses how to suspend Social Security benefits. We will give you an overview of the process, including the eligibility requirements and how to restart your monthly payments. We also talked to a Social Security expert who explained what you should consider before making a decision and the impact of a suspension on future payouts.
If you want to know when suspending your retirement benefits makes sense, this article can help. Read on and find out if suspension of Social Security benefits fits your financial goals in this guide.
The Social Security Administration (SSA) lets members who filed early to voluntarily suspend retirement benefits once they reach full retirement age (FRA). Doing so allows them to earn delayed retirement credits (DRC), which can help boost their retirement income.
As per SSA’s rules, your benefit amount grows by 0.66% increments for each month you hold off claiming payouts past FRA. Calculated yearly, the rate of increase is 8%. Depending on the year you were born, you can earn DRCs equal to between 124% and 132% of your monthly benefits if you wait until age 70. This is on top of any cost-of-living adjustment (COLA) increase.
Suspending Social Security benefits may be a good option if you claimed early but can now afford to live without your monthly payments.
“Many Baby Boomers were put in a challenging position during the COVID-19 crisis,” explained Marcia Mantell, founder and president of Mantell Retirement Consulting, Inc., a retirement business development firm. “Those in their early 60s lost jobs, had to retire, or chose to retire early. In many of those cases, they pulled their Social Security benefit lever earlier than planned.
“Now that they’ve been claiming for three, four, or five years, they see how small their monthly benefit is, especially if Medicare Part B premiums are being deducted directly from Social Security.
“So, reaching FRA gives individuals a good chance to review their income sources and determine if they might be in a position to suspend benefits for the next two to three years. An 8% guaranteed increase can be important.”
To be eligible for voluntary suspension of Social Security benefits, you must meet two criteria:
The key phrase here is “reached full retirement age.” If you filed for benefits early but haven’t hit full retirement age yet, this option isn’t available to you.
Your FRA – also called normal retirement age – depends on the year you were born. If you were born in 1956, for example, your full retirement age is 66 years and four months. The FRA increases in two-month increments every birth year until age 67 for those born in 1960 and later. You can access the SSA’s online retirement age calculator if you want to find out your exact full retirement age.
According to the SSA’s website, you can request to suspend your Social Security benefits “orally or in writing.” You can contact the agency over the phone via 800-722-1213. You can also ask for a suspension of retirement benefits by visiting your local SSA office.
Here are some key points to consider:
Learn more about Social Security rules for divorced spouses in this guide.
Your retirement benefits restart automatically once you reach 70 years old, with your earned credits. Let’s say you collected benefits at age 62, four years before full retirement age. This means you’re receiving just 75% of your FRA benefits. If you suspend your Social Security benefits upon reaching FRA (age 66), your reduced benefits can grow 8% annually for a total of 32% by age 70. This will increase your monthly payouts from 75% to 99% of your full retirement benefits (75% x 1.32 = 99%).
If you want your Social Security payouts reinstated before turning 70, all you need to do is inform the SSA. However, you’re only eligible to receive delayed retirement credits for the period when the benefits were suspended. Continuing with the example above, if you decide to restart your benefits at age 68, after earning 16% in DRC, you can only collect 87% of your FRA benefits (75% x 1.16 = 87%).
Additionally, there’s no restriction on how many times you can suspend your Social Security benefits. Reinstatement of benefits, however, can only be done in the month after you requested for a voluntary suspension.
Check out this guide to learn more about restarting your Social Security benefits.
There are several reasons that might prompt you to opt for a voluntary suspension of Social Security benefits, including:
According to Mantell, getting a larger monthly payment is often the main reason why retirees choose to suspend Social Security benefits.
“The most common reason for voluntarily suspending benefits is to take advantage of delayed retirement credits, an additional ‘bonus’ of 8% per year between FRA and age 70,” she said. “For someone who claimed at 62, for example, due to job loss or early retirement, they might consider suspending their benefits at FRA.
“By stopping payments for three to three-and-a-half years, the annual DRC of 8% will be tacked on to their benefit amount from the time of suspension to the time they reclaim, generally at age 70. In many cases, the DRCs boost their smaller benefit due to early claiming almost back to their original primary insurance amount.”
Check out this guide if you want to learn more about how Social Security benefits work.
Deciding to suspend Social Security benefits can have financial ramifications not only to you but also to those claiming benefits based on your earnings record. Before choosing to go this route, there a few important factors you first need to consider, according to Mantell:
“Before suspending, make sure you have a comprehensive retirement income plan in place,” she explained. “You’ll need to know where you’re making up this temporary loss in monthly income. You do not want to exceed a reasonable withdrawal rate on your personal assets – generally between 3.5% and 5.5% per year.
“Also, understand the implications on your spouse’s or minor children’s benefit payments. If you were the higher earner in a married couple, this move will help the younger spouse receive a higher widow(er) payment if you predecease them.”
Another common mistake that retirees make, according to the Social Security expert, is confusing voluntary suspension with withdrawal of benefits.
“Suspending is not the same as the do-over,” she said. “If someone claims early, then quickly decides they don’t want benefits yet after all, they can have a do-over. In that case, they must pay back all the benefits received to date. And they can only do so during the first year of receiving benefits.”
Apart from your retirement benefits, however, you will need to repay what your spouse and other dependents have claimed. You’re also required to pay back money withheld from your account, including taxes and Medicare premiums. These costs must be paid in one lump sum.
If you’re able to meet these conditions, you can withdraw your retirement benefits as if you had never claimed them. You can then file for Social Security later when the monthly payments are larger, but this can only be done once.
Find out more about the difference between withdrawal and voluntary suspension of retirement benefits in this guide to Social Security do-over.
Choosing to suspend Social Security benefits doesn’t affect your eligibility for Medicare. However, since the SSA takes out Medicare premiums from your monthly checks, it’s important that you know how much exactly is being withheld. Once you decide to voluntarily suspend your retirement benefits, you need to cover the premiums out of pocket. As of 2024, monthly premiums for Medicare Part B, which covers physicians’ services and outpatient hospital expenses, are $174.70. Premiums are often billed quarterly.
If you’re suspending benefits because you’re getting a job, it’s also best to evaluate your employer-sponsored healthcare coverage. Find out how comprehensive the plans are and how much premiums cost. Compare these with those from Medicare. It makes sense to pick the coverage that best suits your needs.
Despite some financial caveats, Mantell said that choosing to suspend Social Security benefits generally impact future retirement payments “positively.”
“Since DRCs will be applied to the suspended benefit, plus the annual COLA, someone who claimed their own benefit too early has a good chance of increasing monthly payments as they move into their later retirement years,” she said. “Once they reclaim their benefit, the future COLAs will be applied to a much higher base amount. All good news for increasing guaranteed income in your 80s and 90s.”
Given the complexities of voluntarily suspending Social Security benefits, it’s best to consult an experienced financial advisor who specializes in retirement planning. If you’re searching for one, our Best in Wealth Special Reports page is the place to go.
Recently, we unveiled the five-star winners of our Top Financial Advisors in the USA awards. Check out how these industry experts can take care of your financial future in our special report.
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