For retirees who have already started collecting Social Security benefits, the idea of voluntarily suspending payments might seem counterintuitive. However, for individuals who have reached Full Retirement Age (FRA) but are not yet 70, this strategy can offer significant financial advantages.
By delaying payments, retirees can increase their monthly benefits, enhance financial security, and boost survivor benefits for their spouse. Let’s look into how voluntary suspension works and why it might be a smart financial move.
Social Security Payments
One of the biggest incentives for suspending Social Security benefits is the opportunity to earn Delayed Retirement Credits (DRCs). These credits increase your monthly payment by 0.67% for each month benefits are suspended, which totals an 8% increase per year.
Example
| Age of Suspension | Age of Resumption | Increase in Benefits |
|---|---|---|
| 67 | 70 | 24% |
| 68 | 70 | 16% |
| 69 | 70 | 8% |
A retiree who suspends benefits at 67 and resumes at 70 will see a 24% increase in monthly payments. This higher payout lasts for life and helps cover future expenses like healthcare, inflation, and daily living costs.
Benefit
This strategy is especially useful for retirees who:
- Have other sources of income, such as pensions, investments, or part-time work.
- Want to maximize their Social Security payments for long-term financial security.
- Need to increase survivor benefits for a spouse who may rely on their income.
- Want to reduce Social Security taxation by managing their overall taxable income.
Tax Planning Advantages
Social Security benefits can be subject to federal income tax if your total income exceeds a certain threshold. By suspending benefits, retirees may reduce their taxable income and minimize the portion of Social Security that is taxed.
This can be particularly helpful for individuals who are withdrawing from tax-advantaged retirement accounts and want to manage their overall tax liability effectively.
No Repayment Required
Unlike the withdrawal of application process, which requires retirees to repay all benefits received, voluntary suspension simply pauses payments. The benefits automatically restart at the higher adjusted rate either when the retiree chooses or when they reach age 70.
Final Thoughts
Knowing the benefits of voluntary suspension can help retirees make informed financial decisions about their long-term stability. By delaying Social Security payments, retirees can increase lifetime payouts, reduce tax burdens, and enhance financial security—both for themselves and their spouses.
If you have other income sources and can afford to wait, voluntarily suspending Social Security could be a powerful strategy to ensure a stronger financial future.
FAQs
Who can suspend Social Security benefits?
Anyone who has reached Full Retirement Age (FRA) but is not yet 70.
How much do benefits increase with voluntary suspension?
Benefits increase by 8% per year, up to 24% if suspended from 67 to 70.
Does voluntary suspension require repaying benefits?
No, payments are simply paused and restart at a higher rate.
Can voluntary suspension help with taxes?
Yes, it can reduce taxable income and lower Social Security taxation.
When do suspended benefits automatically resume?
Benefits automatically restart at age 70 unless resumed earlier.
