Voluntary Suspension of Benefits

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In our world of Social Security and the clients we meet, it is becoming more and more common for clients to proceed with a Voluntary Suspension of their Benefits. What does this mean and why would someone do this?

  1. The option to “voluntarily suspend” refers to a process that is only available after reaching Full Retirement Age and Full Retirement Age is different for each individual based on their date of birth.
  2. In the POMS Manual (Social Security Administration Rules and Regulations) this is explained in POMS GN 02409.100. “Beginning in January 2000, the Senior Citizens’ Freedom to Work Act of 2000, permitted primary beneficiaries who were at Full Retirement Age, but were not yet age 70, to voluntarily suspend payments to earn delayed retirement credits.” Delayed Retirement Credits are 8% per year, for every year you don’t file until age 70. This request can be written or oral and does not have to be signed.
  3. If you elect to Voluntarily Suspend your benefit, please be aware that in the Bi-Partisan Budget Act of 2015, new rules were created that will also stop any spousal or other family benefits paid from the suspended account. This is a huge consideration.
  4. People elect to do this for several reasons: they realized that filing prior to Full Retirement Age was not a good decision on their part. Another reason could be that they have gone back to work and they do not need this benefit, and they would rather collect the Delayed Retirement Credits. Another reason might be that he and his spouse have a big differential in their ages, and she could not file off of his benefit until after he started his benefit again at the later age.

EXAMPLE: Tom began his benefits at age 62. His PIA (primary insurance amount) is $2,000. Starting at age 62 reduces his monthly payment to $1500. At his Full Retirement Age, Tom can suspend his benefit. He will earn 2/3 of 1% delayed retirement credit per month until he resumes benefits. If he waits until age 70 to start them again, his monthly payment will be $1,980 – about 99% of his PIA. Remember though, if any auxillary benefits are being paid off this benefit, they will be suspended also.

This option can be tricky if not calculated with all variables taken into consideration. Social Security has so many options that people are not aware of. You can email us at dthompson@pillarsllc.com or rthompson@pillarsllc.com for more information. Our website is www.pillarsllc.com. We have the experience and knowledge necessary to make an educated decision about these benefits.