Suspending Social Security retirement benefits

My client who is 68 heard that he could suspend his Social Security retirement benefit and earn delayed retirement credits. Is that true and, if so, what are the details?

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with a financial advisor from Oklahoma is representative of a common inquiry related to Social Security benefits.

Highlights of the Discussion
Suspending Social Security benefits is an important tax question for which your client should seek professional tax advice based on his personal situation. Based on guidance available on the Social Security’s website (www.ssa.gov), since your client has reached full retirement age, but is not yet age 70, it appears he can ask the Social Security Administration (SSA) to suspend his retirement benefit payments. By doing this, he will earn delayed retirement credits for each month his benefits are suspended, which will result in a higher benefit payment when he resumes them.

If your client makes the decision to suspend benefit payments after consulting with a financial advisor, he can make a request to suspend payments by calling the SSA or sending a written request. The SSA will suspend benefit payments beginning the month after an individual makes the request. If your client suspends benefit payments, they will automatically start again the month he reaches age 70—or sooner if he requests they restart prior to age 70.

There are several factors to consider when contemplating a suspension of retiree benefits, including, but not limited to, the following.

1. If a retiree voluntarily suspends his/her retirement benefit and he/she has others who receive benefits on their record, the others will not be able to receive benefits for the same period that the retiree’s benefits are suspended. An exception applies for divorced spouses.
2. If a retiree voluntarily suspends his/her retirement benefit, any benefits he/she receives on someone else’s record will also be suspended.
3. Medicare Part B premiums cannot be deducted from suspended benefits. Therefore, a person who suspends his/her retirement benefit will be billed for such premiums.

Conclusion
The rules related to suspending Social Security retiree benefits are complex. It is possible to earn delayed retirement credits by suspending benefits, but other issues such as the availability of family benefits and Medicare considerations may come into play when making the decision. Anyone contemplating a suspension of retiree benefits should seek expert advice from a tax and/or legal advisor.