For retirees who have already started collecting Social Security benefits, the idea of voluntarily suspending payments might come as a surprise. However, for those who have reached Full Retirement Age (FRA) but are not yet 70, this strategy can offer significant financial advantages. By choosing to delay benefits, retirees can increase their monthly payments, improve financial stability, and enhance survivor benefits for a spouse.
Knowing the implications of voluntary suspension is key to making informed decisions about long-term financial security. While it requires careful planning, the benefits can be substantial for those who can afford to delay payments.
How It Works
One of the biggest advantages of suspending Social Security payments is the ability to earn Delayed Retirement Credits (DRCs). For each month that benefits are suspended, retirees receive an additional 0.67 percent per month, which totals an 8 percent increase per year.
For example, if someone suspends benefits at age 67 and resumes them at 70, they would see a 24 percent increase in their monthly Social Security payments. This boost can make a significant difference in covering healthcare expenses, coping with inflation, and maintaining a comfortable lifestyle in later years.
Benefits for Survivors
A higher Social Security benefit doesn’t just benefit the retiree—it can also provide financial security for a surviving spouse. If the higher-earning spouse delays their payments, the surviving spouse may inherit a larger Social Security benefit. This can be particularly beneficial for couples where one spouse relies heavily on the other’s Social Security income.
Voluntary Suspension
Delaying Social Security benefits isn’t the right choice for everyone, but it can be an excellent strategy for individuals who:
- Have alternative income sources, such as pensions, investments, or part-time work
- Want to maximize their Social Security benefits for later years
- Are in good health and expect to live longer, making higher lifetime payouts more valuable
- Want to provide a higher survivor benefit for a spouse
- Are looking for ways to reduce taxable income in retirement
Tax Advantages
Suspending Social Security payments can also be a smart tax-planning move. Social Security benefits are subject to federal income tax if a retiree’s total income exceeds a certain threshold. By delaying benefits, retirees can potentially lower their taxable income and reduce the amount of their Social Security subject to taxation.
No Repayment Required
Unlike withdrawing a Social Security application—which requires repaying all benefits received—voluntary suspension does not require repayment. Instead, payments are simply paused and will automatically restart at a higher amount when the retiree chooses to resume them or reaches age 70.
Key Takeaways
| Factor | Details |
|---|---|
| Eligible Age | Full Retirement Age (FRA) to 70 |
| Benefit Increase | 8% per year (0.67% per month) |
| Survivor Benefit | Higher benefit for a surviving spouse |
| Tax Planning | Can reduce taxable income in retirement |
| Repayment Required? | No, payments are just paused |
For those who can afford to delay Social Security payments, voluntary suspension can be a strategic way to increase financial security later in life. Carefully considering income sources, tax implications, and long-term needs can help retirees make the best decision for their future.
FAQs
Who can suspend Social Security payments?
Anyone who has reached Full Retirement Age but is under 70.
How much do benefits increase with suspension?
Benefits increase by 8% per year or 0.67% per month.
Does voluntary suspension require repayment?
No, payments are simply paused and restart later.
Can suspending benefits reduce taxes?
Yes, it may help manage taxable income in retirement.
When do suspended benefits restart?
Automatically at age 70 or when the retiree chooses.
